Another addition to the killer interview questions collection: how much would we have to pay you to run this betting game?
Betting picture from Shutterstock
More specifically, the question (used by Goldman Sachs) involves the following game:
The rules are that I flip a coin, and if it comes up heads, you pay me a dollar and the game is over. If it comes up tails, you flip again. If it comes up heads the second time, you pay me two dollars, and the game is over. If it comes up tails again, you flip again. Third time, you pay me four dollars for heads and the game is over, and you flip again for tails. And so on and so on, each time doubling the payout for heads, and flipping again on tails. How much would I have to pay you up front to play this game?
The question is designed to both tests your mathematics knowledge and assess your appetite for risk — a relevant consideration for security professionals as well as investment bankers. As this analysis explains, the odds of your paying out more than $8 are very low, so that might be a safe number. But I’m inclined to think the better answer is “I wouldn’t take part in something where there was a potential for a really massive loss”.
How would you answer the question?