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mz19
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Homework Statement
1. Sports arbitrage: The following lines are available at different bookmakers on next week’s game for the Steelers
versus the Ravens:
Bookmaker 1: 1:1 odds that the Oakland beats Tennessee (if you bet $1, you win $2 for an Oakland win)
Bookmaker 2: 2:1 odds that the Tennessee beats the Oakland (if you bet $1, you receive $3 for a
Tennessee win)
You have $1000 to spend and bets must be made at each bookmaker in multiples of $100. If X is the amount that
you place with Bookmaker 1 and Y is the amount that you place at Bookmaker 2:
a. Draw the feasible region for combinations of bets that will guarantee a WINNING (not breakeven)
amount and label its corners. Use solid or dotted lines appropriately.
b. Choose a bet combination that will guarantee a positive payout after the game is played. You’ll need
to go to the interior or far edge of the region to find one that the bookmakers will accept.
Homework Equations
Just the information given and general math knowledge
The Attempt at a Solution
So I know that to set this up, x + y ≤ $1000
I'm unsure of where to incorporate the $2 and $3 winnings into an equation
If it has to be in multiples of $100 to equal the $1000 than can I just use x+y≤100 because there are 100 parts? As in he place 100 bets divided between x and y.
If it has to be winning and not break even then x($2) + y($3) > $1000. It cannot be equal