Question

9. A contractor is considering a sale that promises a profit of $27,000 with a probability of 0.7 or a loss (due to bad weather, strikes, and such) of $12,000 with a probability of 0.3. What is the expected value?

Answer 1

Hence the expected value for the contractor for sales is 15,300 $.

Explanation:

Given:

Winning $27000 is 0.7 and losing 12000 $ of it about 0.3

To find :

Expected value for the contractor for sales.

Solution:

Th expected value is the average occurred of the event.

{Suppose

a series of number like 10,30,30,30,30,60,78.

for this expected value will be

(10+30+30+30+30+60+78+78) / 8

=10(1/8)+30(4/8)+60(1/8)+78(2/8).

78 ,10 ,30 and 60 are just like cost and 1/8 ,4/8,2/8 are probabilities of respective cost.

}

Similar for given values

Expected value with probability is =

Winning probability *cost of winning +(-losing probability * losing cost)

losing means negative impact on value so it is negative

=27000*0.7-12000*0.3

=18900-3600.

=15300 $.