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Winning exactly once before going broke

Question

Each round of a game costs 1010 to enter; you win the round with probability 0.10.1, in which case you are handed 8080, and otherwise you get nothing. You begin with 3030 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 0.1050.105. One win brings total funds to 30+80=11030+80=110, i.e. exactly 1111 rounds, so the path must have 11 win and 1010 losses. The win must come within the first three rounds (before the initial 3030 runs out), giving 3×0.1×0.910≈0.1053\times0.1\times0.9^{10}\approx0.105.

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

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