Hi guys,

I would like to ask you a question regarding an article MathProf posted on this website. Here is a link to the article.

http://www.bj21.com/bj_reference/pages/overheadeffectonriskofruin.shtml

Here is a summary of the relevant passage from MP's article:

Expectation/Hr = $30

Expenses/Hr = $15

Kelly-factor = 1.0

BR = $3k

After accounting for hourly expenses, MP implies that the Kelly-factor changes from 1.0 to 2.0 (ROR of 36.8%). Unfortunately, he does not show the math he uses to calculate the 36.8% ROR.

Can you please explain how to determine the new ROR (adjusted k-f)which takes expenses into account? I don't think the math is too complicated, I just don't know how to do it.

If you guys don't mind, I have one more question for good measure:

Expectation/Hr = $100

Expenses/Hr = $20

Kelly-factor = 0.25

BR = $100k

What does the Kelly-factor become AFTER taking expenses into account? Please show the math you use to figure it out.

Thanks to whomever can answer,

MJ