You play a gambling game with a friend in which you win 25% of the time and lose 75% of the time.

Question

You play a gambling game with a friend in which you win 25% of the time and lose 75% of the time. When you lose, you lose $1. What profit should you earn when you win, in order for the game to be fair?

A. $4

B. $1   '

C. $3

D. $2

Answer 1

It is 3 times as probable to lose as it is to win, so for the game to be fair (break even), the profit for winning needs to be three times as much as the cost of losing, or $3.