If a 44% chance to win something pays a ratio of 2:5 what should a 3% chance to win payout?

Question

Exactly what the question says, Thanks!

Answer 1

Kyle,

To ask what should it pay out assumes that there is mathematical support for what is offered by the house. That is not always a safe assumption. But if this is a text book question, we must follow that logic. Also, there are many different ways to present odds/probabilities and payouts. We don't have to know all the details to come up with a number. The mathematical approach for this would say that as the risk increases (chance of winning goes down), the payout increases proportionately. In other words, there is a fixed multiplier (k) which determines the payout.

 

k * 44/100 = 2/5

k = 2/5 * 100/45 = 10/11

 

10/11 * 3/100 = 3/110

 

I hope that helps.