Question

An architect is considering bidding for the design of a new museum. The cost of drawing plans and submitting a model is ​$13 comma 000. The probability of being awarded the bid is 0.1. If the architect is awarded the​ bid, she will make ​$130 comma 000 minus the ​$13 comma 000 cost for plans and a model.

What is the expected value in this situation?

Answer 1

$0

Explanation:

So there's a 0.1 probability of winning $130000 minus $13000 cost and 0.9 chance of losing $13000

Then the expected value of this game is

Probability of winning * winning value + probability of losing * losing value

0.1*(130000 - 13000) - 0.9*13000 = 11700 - 11700 = $0

Anyone playing this game should make even after a while