A Game Involving a Pair of Dice Pays You $4

question 3

Multiple Choice

A game involving a pair of dice pays you $4 with probability 16/36, costs you $2 with probability 14/36, and costs you $6 with probability 6/36.
What is your expected net result, in dollars, per play?

• A) -$8
• B) -$1.78
• C) $0
• D) $1.78
• E) $8

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Definitions:

Year 0 Value

Year 0 Value is a reference point in financial analysis indicating the value of an investment or project at the beginning period before any growth or decline.

Weighted Average

Weighted average is a calculation that takes into account the varying degrees of importance of the numbers in a data set.

Free Cash Flows

The amount of cash generated by a business that is available for distribution to its securities holders after capital expenditures.

Year 0 Value

A reference to the initial value or investment amount at the beginning of a project or investment period, often used in financial analysis.