Consider the following scenario to answer the questions that follow.
Suppose that in an experimental setting, 100 students are asked to choose between Gamble A and Gamble B, where:
Gamble A: The student will receive $50 with a 70% probability and $100 with a 30% probability.
Gamble B: The student will receive $50 with a 50% probability, $200 with a 25% probability, and $0 (nothing) with a 25% probability.
-What is the expected value (EV)of Gamble A?
A) $0
B) $100
C) $50
D) $45
E) $65

Question

Quizplus · Accepted Answer

The expected value of Gamble A is calculated as follows: (0.7 * $50) + (0.3 * $100) = $35 + $30 = $65.

Consider the Following Scenario to Answer the Questions That Follow