You have invested in a project that has the following payoff schedule: What is the expected value of the investment's payoff? (Round to the nearest $1.)
A)$60
B)$65
C)$58
D)$70

Question

You have invested in a project that has the following payoff schedule:  What is the expected value of the investment's payoff? (Round to the nearest $1.)
A)$60 
B)$65 
C)$58 
D)$70

Quizplus · Accepted Answer

To find the expected value, we multiply each possible payoff by its probability and then add them up. In this case, the calculations are:

- 0.3 × 10 = 3
- 0.2 × 50 = 10
- 0.1 × 80 = 8
- 0.4 × 70 = 28
- 0 × 100 = 0
- 0 × 120 = 0

Adding these up, we get:

3 + 10 + 8 + 28 + 0 + 0 = 49

Rounding to the nearest $1, the expected value of the investment's payoff is $49. Therefore, the best choice is C, as it is the closest answer option to $49.

You Have Invested in a Project That Has the Following