Francine is preparing for a meeting with her boss about a pay raise. She is quite good at her job but is not 100% sure she will get the raise she wants. She will request an increase of $5,000 but believes that the probability of getting the full $5,000 is just 25%. She believes there is a 25% probability that her boss will counter with a $3,000 raise and a 25% probability that her boss will offer a $1,000 raise. Finally, there is a 25% probability that she will receive no increase in salary. What is the expected value of the outcome of her meeting?

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each outcome by its probability and summing the results: (0.25 * $5,000) + (0.25 * $3,000) + (0.25 * $1,000) + (0.25 * $0) = $1,250 + $750 + $250 + $0 = $2,250.

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