options are : the one for $1000 the one for $10,000 the one for $20,000 the one for $50,000
First 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.
wait what chart
I 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.
am i looking for what expected value gives me 1mil
1.3600 2.9000 3.20000 4.95000
i calculated and this what i got for the last 3
i finished the chart
wouldnt the right answer be D it has the highest expected value
What was your calculated expected value for D?
Not correct. Check your calculation again.
shouldnt it be 1,000,000-50,000= 95,000 x .01
nvm D is 950
the best answer would be C since its 20,000
The calculation for D is : $950,000 * 0.01 = $9500
so its C
Yes, C gives the highest expected value.
You're welcome :)