In a Game Called Taxation and Evasion,a Player Rolls a Pair

question 189

Short Answer

In a game called Taxation and Evasion,a player rolls a pair of dice.If on any turn the sum is 7,11,or 12,the player gets audited.Otherwise,she avoids taxes.Suppose a player takes 5 turns at rolling the dice.The variance of the number of times she will be audited is _____.

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Definitions:

Non-U.S. Stocks

Shares of companies based outside of the United States, often used to diversify investment portfolios.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between risk and expected return for assets, particularly stocks.

Exchange-Rate Risk

The potential for investors to experience losses due to changes in the exchange rate between two currencies in their foreign investment transactions.

World-Index Portfolio

An investment portfolio comprising a wide variety of assets that aim to mirror the performance of global financial markets or specific global indexes.