There is a 30% probability that an office building will be sold after five years for $30 million, a 50% probability that it will be sold for $20 million and a 20% probability that it will be sold for $10 million.What is the expected value of the office building in five years?
A)$20 million
B)$21 million
C)$30 million
D)$10 million

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each possible outcome by its probability and adding them together. 
Expected value = (0.3 x $30 million) + (0.5 x $20 million) + (0.2 x $10 million) 
Expected value = $9 million + $10 million + $2 million 
Expected value = $21 million

There Is a 30% Probability That an Office Building Will