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anonymous
 one year ago
A diamond merchant has a chance to buy one of 4 diamonds and wants to sell it immediately. One costs only $1000, but he has a 90% chance of getting $5000 for it (or not selling it at all). The second costs $10,000, and he has a 60% change of selling it for $25,000 (or not selling it at all). The third costs $20,000, but he has a 50% chance of selling it for $60,000 (or not selling it at all). The last diamond costs $50,000, but he has a 1% chance of selling it for $1,000,000 (or not selling it at all). Which diamond gives him the best expected value?
anonymous
 one year ago
A diamond merchant has a chance to buy one of 4 diamonds and wants to sell it immediately. One costs only $1000, but he has a 90% chance of getting $5000 for it (or not selling it at all). The second costs $10,000, and he has a 60% change of selling it for $25,000 (or not selling it at all). The third costs $20,000, but he has a 50% chance of selling it for $60,000 (or not selling it at all). The last diamond costs $50,000, but he has a 1% chance of selling it for $1,000,000 (or not selling it at all). Which diamond gives him the best expected value?

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anonymous
 one year ago
Best ResponseYou've already chosen the best response.0options are : the one for $1000 the one for $10,000 the one for $20,000 the one for $50,000

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1First convert the percentages to decimals, for example 90% converts to a probability of 0.9. Then multiply the profit by the probability to get the expected value. Cost Profit Probability Expected Value $1000 5000  1000 = $4000 0.9 $4000 * 0.9 = $3600 Now you can complete the table to find the correct choice of answer.

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1@shavu1 Are you there?

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1I have put the details for the first diamond in the above table to show you the method. Now you need to put in the details for the other three diamonds.

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0am i looking for what expected value gives me 1mil

anonymous
 one year ago
Best ResponseYou've already chosen the best response.01.3600 2.9000 3.20000 4.95000

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0i calculated and this what i got for the last 3

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1dw:1442257433971:dw

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0i finished the chart

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0wouldnt the right answer be D it has the highest expected value

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1What was your calculated expected value for D?

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1Not correct. Check your calculation again.

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0shouldnt it be 1,000,00050,000= 95,000 x .01

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0the best answer would be C since its 20,000

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1The calculation for D is : $950,000 * 0.01 = $9500

kropot72
 one year ago
Best ResponseYou've already chosen the best response.1Yes, C gives the highest expected value.
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