Blanca has her choice of either a certain income of $20,000 or a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. The expected value of the gamble:
A) is less than $20,000.
B) is $20,000.
C) is greater than $20,000.
D) cannot be determined with the information provided.

Question

Quizplus · Accepted Answer

The expected value of the gamble is calculated as (0.5 * $10,000) + (0.5 * $30,000) = $5,000 + $15,000 = $20,000, which is equal to the certain income of $20,000.

Blanca Has Her Choice of Either a Certain Income of $20,000