Fair price of a high-faces-only dice sum
Two fair dice are rolled. A contract pays you the sum of the faces - but only the dice showing a 4, 5, or 6 count; any die showing 1, 2, or 3 contributes nothing. What is the fair price of this contract (in dollars, to two decimals)?
Show hints (2)+
- The two dice contribute independently - value one die's expected contribution and double it.
- For one die, low faces pay : .
Answer
Reveal answer →Final answer
5 (± 0.01)
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Asked at: Timed Mental-Math & Sequences, Options Market-Making