Micah is considering turning pro before his senior basketball season.If he turns pro, Micah expects a pro contract worth $2 million in present value.If he does not turn pro, there is a 50% chance an injury will prevent him from playing professionally and a 50% chance he will get a pro contract worth $4 million in present value.What is the expected present value of Micah's pro contract if he stays in college for his senior year?
A)$3.5 million
B)$5 million
C)$2 million
D)$0

Question

Quizplus · Accepted Answer

The expected present value if Micah stays in college is calculated as (0.5 * $0) + (0.5 * $4 million) = $2 million.

Micah Is Considering Turning Pro Before His Senior Basketball Season