Quiz: Optimal Strategy 4 questions · 80% to pass 1. A coin flip pays $300 on heads and costs $100 on tails. What is the expected value?$200$100$50$0EV = (0.5 x $300) + (0.5 x -$100) = $150 - $50 = $100. This is a positive expected value bet worth taking repeatedly.2. The Kelly Criterion determines:Whether a bet has positive expected valueThe optimal fraction of your capital to wagerWhich asset class to invest inWhen to exit a losing positionThe Kelly Criterion calculates the optimal bet size as a fraction of your bankroll that maximizes long-term geometric growth rate.3. Betting MORE than the Kelly fraction results in:Faster growth than full KellySame growth with more riskMore risk AND less long-term growth than full KellyGuaranteed lossOver-betting (exceeding Kelly) is mathematically suboptimal: it increases variance while actually reducing long-term geometric growth rate. It's strictly worse than full Kelly.4. Minimax strategy focuses on:Maximizing the best possible outcomeMinimizing your maximum possible lossFinding the average expected returnTiming the market perfectlyMinimax minimizes your maximum possible loss. It asks 'what's the worst case and how do I survive it?' rather than 'what's the best case and how do I capture it?' Check answers Retake quiz Back to lesson Next lesson →