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Math Help - Should I take the bet

  1. #1
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    Should I take the bet

    HI I am trying to get my head around odds maybe someone can explain it better.

    here is a example a person writes down a number one to 5 and bets $5 against your $1 that you cannot guess the number, should you take the bet?

    now the answer is yes because you are getting $5 to $1 on a 4 to 1 proposition shouldn't this be 5 to 1 ? so it is a even bet so there is no point of betting?

    Thanks
    Jeremy M. Smith
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  2. #2
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    so, the outcomes are as follows:

    You get $6 with probability 0.2
    You get $0 with probability 0.8

    Expected payoff = 0.2*6 + 0.8*0 = 1.2

    So on average, you are getting $1.2 back for every $1 you put in, and you should take this bet.


    I assume you are treating this as a statistics problem rather than an economics problem. If you are studying this in the context of an economics course the answer depends on how risk averse you are.
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  3. #3
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    I am trying to work it out in the sense of poker it was a example in a book. my head is spinning lol.


    I can't get my head around it. I lose 4 out of 5 times I still have to put my 5th dollar in to win the 5th time and he is given me 5 dollars. So arn't I laying $5 to win $5 ?
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  4. #4
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    OK there was a mistake in my answer.

    I assume you are saying
    If you win he gives you $5
    if you lose you give him $1

    So, the average payoffs are:
    (0.8 * -1) + (0.2*5) = $0.2

    So, you should take the bet.
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  5. #5
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    yea I think I read the question wrong lol thanks heaps
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