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A diamond merchant has a chance to buy one of 4 diamonds and wants to sell it immediately. One costs only $1000, but he has a 90% chance of getting $5000 for it (or not selling it at all). The second costs $10,000, and he has a 60% change of selling it for $25,000 (or not selling it at all). The third costs $20,000, but he has a 50% chance of selling it for $60,000 (or not selling it at all). The last diamond costs $50,000, but he has a 1% chance of selling it for $1,000,000 (or not selling it at all). Which diamond gives him the best expected value?

User Jan Franta
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5.2k points

1 Answer

7 votes
Hey!
The answer would be $20,000.

Good Luck:)
Hope that helped you!

User Prakash Chennupati
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5.7k points