Question

Question 4 (1 point) Phil Dunphy, a real estate agent, is considering whether he should list an unusual $345,584 house for sale. If he lists it, he will need to spend $5,892 in advertising, staging, and fresh cookies. The current owner has given Phil 6 months to sell the house. If he sells it, he will receive a commission of $19,166. If he is unable to sell the house, he will lose the listing and his expenses. Phil estimates the probability of selling this house in 6 months to be 33%. What is the expected profit on this listing? Your Answer:

Answer 1

Answers:

The expected profit on the listing is $2377.14

Explanation:

Given that:

The probability of selling the house in 6 months is p = 0.33

The probability of not selling the house = 1 - 0.33 = 0.67

Suppose X represents the profit on the listing;

Then: we can compute the expected profit on the listing as:

E(X) = ($19166 × 0.33) - ($5892 × 0.67)

E(X) = $6324.78 - $3947.64

E(X) = $2377.14

Thus, the expected profit on the listing is $2377.14