Questions / Quant trading, Expected value & odds
Price a bag of payoffs
A bag contains payoffs of 2, 4, 8, and 10 points. One is chosen uniformly. What is the fair expected payout?
Answer it in the app It's free. You get hints, a second try if you miss, and a follow-up question.
Show the answer and worked solution
Answer: 6 points
- The average is (2 + 4 + 8 + 10) / 4 = 6.
Interview shortcut. Pair the ends: 2 + 10 and 4 + 8 both average 6.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.