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Statistics

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A scratch-card costs 5¤ and has two possible prizes. There is a 10% chance you get 5¤ back and a 1% chance you get 100¤. In all other cases, you get nothing. Let X denote your net winnings, i.e, (X = prize - cost). What are the expectation and standard deviation of X?

  • Statistics - ,

    E(X) = (5¤ - 5¤) * 10% + (100¤ - 5¤) * 1% + (0¤ - 5¤) * 89%
    E(X) = 0 * 10% + (95) * 1% + (-5) * 89%
    = -3.5¤

    SD(X) = √ [ (0 - (-3.5)) ² * 10% + (95 - (-3.5)) ² * 1% + (-5 - (-3.5)) ² * 89%]
    SD(X) = _______

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