Calculate the expected rate of return for the investment described

Question

You play a gambling game with your friend in which you win 70% of the time and lose 30% 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? (Round your answer to the nearest cent.)

Answer 1

.7(x) - .3(1) = 0

.7x = .3

x = .3/.7 = 3/7 = $..43 = 43 cents for a win to break even, rounded off to nearest penny

on an average game you lose .3(1)= 30 cents

and you win (.7)x = 30 cents = $.30

x = .30/.7 = 43 cents, rounded off

43 cents to win to break even