Question

To generate new leads for business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3500, and the average first-year commission for each new account opened is $5000. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account. a. Determine the equation for computing Gustin's profit per seminar, given values of the relevant parameters. b. What type of random variable is the number of new accounts opened

Answer 1

a. The equation for computing Gustin's profit per seminar can be expressed as follows:

Profit = (Commission per new account * Number of new accounts) - Cost per seminar

Profit = ($5000 * 0.01 * 25) - $3500

Profit = $125 - $3500

Profit = -$3375

Therefore, Gustin is expected to lose $3375 per seminar.

b. The number of new accounts opened is a binomial random variable, as it has a fixed number of trials (25 individuals attending the seminar), and each trial (individual) has a binary outcome (either opening a new account or not).

Step-by-step explanation: