Came across interesting practice MMI question

[UptempoCat5]

I'm curious on how to even approach this question, being given only 2 minutes to read it and 5-8 minutes to discuss it. Here it is:

Imagine that there are three types of gift cards.

Card Type A costs $500. This card has a 1/500 chance of having a balance of $50,000 and a 499/500 chance of having only $450 in it.

Card Type B costs $50. It has a 1/5 chance of containing $150, a 1/5 chance of containing $50, and a 3/5 chance of having a balance of only $25.

Card Type C costs $5 and always has a balance of $5.

Part A:
You have $1,000 to spend. How would you break down your purchases?

Part B:
Assuming that you’ve won $100,000 by purchasing two Type A gift cards, how would you use this money?

In Part A, are they expecting me to be analytical and calculate the best possible solution, or are they testing how much of a risk-taker I am? In Part B, are they testing whether I'm altruistic or selfish?

---

Members don't see this ad.

 

[deleted555445]

Put all your money in Card B! It has an expected value above its cost!

 

[medicaldoctor041815]

Put all your money in Card B! It has an expected value above its cost!

what about the 60 percent chance that you lost 50 percent of your initial investment?

 

[deleted555445]

what about the 60 percent chance that you lost 50 percent of your initial investment?

If you have $1000, you can buy 20 cards at $50 a pop. Statistically, 4 cards will win $150, 4 cards will win $50, and 12 cards will win $25. Add that up and you end up with $1100, a $100 profit. Rinse and repeat until you're a billionaire!

 

[Damson]

If you have $1000, you can buy 20 cards at $50 a pop. Statistically, 4 cards will win $150, 4 cards will win $50, and 12 cards will win $25. Add that up and you end up with $1100, a $100 profit. Rinse and repeat until you're a billionaire!

I think this is the right answer. Good work

 

[deleted966164]

I think this is the right answer. Good work

While this is a good answer from the point of view of statistics/probability, when answering a CASPr question you also should touch upon some touchy-feely stuff so that you cover both "This person thinks rationally" and "this person also values human feelings."

 

[Goro]

I'm curious on how to even approach this question, being given only 2 minutes to read it and 5-8 minutes to discuss it. Here it is:

Imagine that there are three types of gift cards.

Card Type A costs $500. This card has a 1/500 chance of having a balance of $50,000 and a 499/500 chance of having only $450 in it.

Card Type B costs $50. It has a 1/5 chance of containing $150, a 1/5 chance of containing $50, and a 3/5 chance of having a balance of only $25.

Card Type C costs $5 and always has a balance of $5.

Part A:
You have $1,000 to spend. How would you break down your purchases?

Part B:
Assuming that you’ve won $100,000 by purchasing two Type A gift cards, how would you use this money?

In Part A, are they expecting me to be analytical and calculate the best possible solution, or are they testing how much of a risk-taker I am? In Part B, are they testing whether I'm altruistic or selfish?

Yes, and yes,