Odds question
July 6th, 2015 at 5:08:51 PM
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Got a question in a recent interview and wasn't convinced the answer they told me was right.
You are given a bag with money in it. Inside the bag is 20 bills made up of $1, $5, $10, and $20, five of each. You have to pull one bill out of the bag and if you're not happy with what you picked you can put it back in the bag and pull again. You are only allowed to do this one time. What is the most amount of money you should pay to be able to play the game?
You are given a bag with money in it. Inside the bag is 20 bills made up of $1, $5, $10, and $20, five of each. You have to pull one bill out of the bag and if you're not happy with what you picked you can put it back in the bag and pull again. You are only allowed to do this one time. What is the most amount of money you should pay to be able to play the game?
July 6th, 2015 at 6:08:34 PM
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I'll take a quick stab off the top of my head.
Your last draw is worth $9. That's (1+5+10+20)*5/20. On your first draw, you keep the 10 or 20. So your expected values are 10(10), 20(20), 1(draw again=9), 5(draw again=9). So that's (10+20+9+9)*5/20 = 12.
This game would have positive EV if it cost $11.99. Although, I would only play for a given amount of money per hour that I found satisfying, so it would have to be cheaper than that for me.
This game would have positive EV if it cost $11.99. Although, I would only play for a given amount of money per hour that I found satisfying, so it would have to be cheaper than that for me.
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1." -Warren Buffett on risk/return
July 6th, 2015 at 6:11:25 PM
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I agree with surrender88s's solution
