You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $110 with probability 0.2 or a value of $65 with a probability of 0.8.Which project should you invest in?
A)Project A
B)Project B
C)Neither of the projects
D)You cannot tell from the information presented

Question

​You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $110 with probability 0.2 or a value of $65 with a probability of 0.8.Which project should you invest in?
A)​Project A
B)Project B
C)Neither of the projects
D)​You cannot tell from the information presented

Quizplus · Accepted Answer

The expected value of Project A is (0.1 * $150) + (0.9 * $75) = $15 + $67.5 = $82.5. The expected value of Project B is (0.2 * $110) + (0.8 * $65) = $22 + $52 = $74. Therefore, Project A has a higher expected value.

​You Can Either Invest in Project a or B

You Can Either Invest in Project a or B