1
$\begingroup$

For the following question, I've determined the mean to be \$0.20, but how do I determine the standard deviation?

A slot machine at a casino pays out an average of \$0.9, with a standard deviation of \$120. It costs a dollar per play. If a person plays 2 times, what are the mean and standard deviation of the casino's profit?

I've calculated the variance to be $\$120^2=\$14400$, and then $(\$14400)(2^2)=57600$ (since the person played twice), taking square root: SD=$\sqrt{57600}=\$240$.

But in fact, the SD= $\$169.71$.

Why?

Update: I now realize that each event is independent and that I should add the variances instead of multiply.

$\endgroup$

1 Answer 1

1
$\begingroup$

Why do you multiply the variances? You have to sum them up!

$SD = \sqrt{120^{2} + 120^{2}} = \sqrt{28,800} = 169.7056$

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.