Winning exactly once before going broke
Question
Each round of a game costs to enter; you win the round with probability , in which case you are handed , and otherwise you get nothing. You begin with and keep playing until you can no longer afford a round. What is the probability, to three decimal places, that you win exactly one round before running out of money?
Short answer
About . One win brings total funds to , i.e. exactly rounds, so the path must have win and losses. The win must come within the first three rounds (before the initial runs out), giving .
Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.
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Open the worked solutionLessons behind this question
- Sample Spaces, Events, and the Probability Axioms
- Conditional Probability, Total Probability, and Bayes' Rule
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