Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon,which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming,which has a payoff of 4X with 25% probability and $0 with 75% probability.Dean's expected payoff from investing in Pretty Kitty Grooming only is:
A) $500.
B) $2,000.
C) $1,000.
D) $1,500.

Question

Quizplus · Accepted Answer

The Answer of Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon,which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming,which has a payoff of 4X with 25% probability and $0 with 75% probability.Dean's expected payoff from investing in Pretty Kitty Grooming only is:
A) $500.
B) $2,000.
C) $1,000.
D) $1,500.

Suppose Dean Has $500 and There Are Two Companies He