Quote:
Originally Posted by fishlolface
0.4 * 45 = +$18.00
0.6 * -18 = -$10.80
18-10.8= $7.20 (which is more than breakeven)
2/7 * 45 = +$12.86
5/7 * -18 = -$12.86
12.86-12.86= $0.00 (which is breakeven)
This working is correct isn't it?
No, it isn't!
Look at your first equation. This is correct as far as it goes. i.e. if you have a 40% chance of winning $45 then this equates to an expected gain of +$18.
But, you are not freerolling.
In order to participate, you must pay $18 for the privilege.
Thus, your gain is $18; it costs $18; so net EV is $0.
Your 2nd equation is totally muddled thinking.
The reality is you will either receive $45 or $0.
If you have an infinite number of trials, this will average out to receiving $18 for each trial (your equation #1).
Then, you find out that each trial costs you $18 so the proposition is break-even.
Do you see why your 2nd equation doesn't make sense now?
Last edited by erniebilko; 07-16-2010 at 12:32 AM.
Reason: belaboring the point