Question

A business has an opportunity to invest $35,000. If the investment is a success, the business earns a profit of $150,000. Otherwise, the investment will result in a total loss of all monies. If the investment has 0. 27 chance of success, which equation correctly models the expected value of this investment? 0. 27(150,000) 0. 73(â€"35,000) = E(X) 150,000 â€" 0. 73(35,000) = E(X) 0. 27(150,000 â€" 35,000) = E(X) 0. 27(115,000) 0. 73(â€"35,000) = E(X).

Answer 1

0.27(150,000) = E(X)

Explanation:

expected value = the sum of each outcome multiplied by the likelihood of each outcome happening

here, we have two outcomes:

1. 150,000, with a 0.27 chance of success

2. 0, with a 1-0.27 = 0.73 chance of failure

multiply the outcomes with their probabilities and add them up

0.27(150,000) + 0.73(0) = 0.27(150,000) = E(X) as anything multiplied by 0 = 0