Question

An oil company is considering 2 sites on which to drill, described as follows:

Site A: profit of oil is found: $60 million
Loss if no oil is found: $5 million
Probability of finding oil: 0.2
Site B: profit of oil is found: $90 million
Loss of no oil is found: 0.1

A: Which site has the larger expected profit?

B: if the expected profit for both sites is not the same, by how much is the expected profit larger?

Answer 1

A)site A has a larger probablility of finding oil
B) the difference between amount of profitmade is 30 million.