Suppose each round costs $1.00 at a slot machine on which you can win $2.00 with probability p = 40%. You start playing with $10.00 and decide that you will keep playing until you either double your wealth (that is, earn another $10.00) or run out of money. What is the probability that you run out of money? (Remember: You do not need to simplify your answer.)

Question

Barrett Drake

Business

2 January, 04:07

Suppose each round costs $1.00 at a slot machine on which you can win $2.00 with probability p = 40%. You start playing with $10.00 and decide that you will keep playing until you either double your wealth (that is, earn another $10.00) or run out of money. What is the probability that you run out of money? (Remember: You do not need to simplify your answer.)

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Answers (1)

Know the Answer?

Melany Blevins · Answer 1

0.0061514752

Explanation:

probability of not winning $2 = 0.6

Pobability of doubling wealth: p^10 = (0.4) ^10 = 0.0001048576

probability of running out of wealth or not earned anything: (0.6) ^10 = 0.0060466176

Probability of doubling or running out of wealth = 0.0001048576 + 0.0060466176 = 0.0061514752