January 25 Boards

Tree diagram for the number of heads possible in 3 successive flips of a coin

Probability distribution for number of heads in 3 flips of a coin

Pg 221, #3 – mean number of credit cards owned by bank customers

Pg 221, #3 continued … standard deviation for the credit cards

Considering risk and reward, which is the better investment? Which one has the better expected value?

The expected value of Bond X is better than Bond Y, so Bond X has a better payoff for the risk involved.