Spread of a coin-flip payoff
You flip a fair coin times. You win $2 for every head and lose $1 for every tail. What is the variance of your net payoff ?
Show hints (2)+
- Tails = 9 - H, so the payoff is P = 2H - (9 - H) = 3H - 9, a function of H alone.
- Var(3H - 9) = 9 Var(H), and Var(H) = n p (1-p) = 2.25.
Answer
Reveal answer →Final answer
20.25
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