Consider the following scenario when answering the following questions:
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 $5 million with a 100 percent probability.
Gamble B: The student will receive $5 million with a 51 percent probability,$10 million with a 25 percent probability,and $0 million (nothing)with a 24 percent probability.
-What is the expected value of Gamble B?
A) $5 million
B) $5.01 million
C) $5.05 million
D) $10 million
E) $0 million

Question

Quizplus · Accepted Answer

The expected value of Gamble B is calculated as follows: (0.51 * $5 million) + (0.25 * $10 million) + (0.24 * $0 million) = $2.55 million + $2.5 million + $0 million = $5.05 million.

Consider the Following Scenario When Answering the Following Questions