Bailey owns a farm, and her annual crop is dependent on the weather. If it has been an exceptionally rainy year, she can expect to earn $70,000. If it has been a very dry year, she will earn $20,000. If the weather is moderate, she will earn $50,000. There is a 20 percent chance that it will be a very rainy year; a 30 percent chance that it will be a very dry year; and a 50 percent chance that the weather will be moderate. What is the expected value of Bailey's earnings?
A)$50,000
B)$25,000
C)$45,000
D)$60,000

Question

Quizplus · Accepted Answer

The expected value of Bailey's earnings is calculated by multiplying each outcome by its probability and then summing those products: (0.20 * $70,000) + (0.30 * $20,000) + (0.50 * $50,000) = $14,000 + $6,000 + $25,000 = $45,000.

Bailey Owns a Farm, and Her Annual Crop Is Dependent