Question

a farmer is going to plant some yams in his open plot. he has a 20% chance to have a good yield, 30% chance for an average yield, and a 50% chance for a bad yield. the payoffs for a good, average, and bad yield are $8,000, $2,000, and -$2,000 respectively. what is the expected value? group of answer choices

Answer 1

The expected value for the yam yields is $1,200.

Step-by-step explanation:

The expected value is calculated by multiplying the probabilities of each outcome by their respective payoffs and summing them up. In this case, the farmer has a 20% chance of a good yield, which has a payoff of $8,000. The average yield has a 30% chance and a payoff of $2,000, and the bad yield has a 50% chance and a payoff of -$2,000.

To calculate the expected value, we multiply the probability of each outcome by the corresponding payoff and sum them up:

Expected value = (0.20 * $8,000) + (0.30 * $2,000) + (0.50 * -$2,000)

Expected value = $1,600 + $600 - $1,000 = $1,200

Therefore, the expected value for the yam yields is $1,200.