Under normal conditions (60% probability), Financing Plan A will produce a $30,000 higher return than Plan B. Under tight money conditions (40% probability), Plan A will produce $40,000 less than Plan B. What is the expected value of return?

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each outcome by its probability and summing the results: (0.6 * $30,000) + (0.4 * -$40,000) = $18,000 - $16,000 = $2,000.

Under Normal Conditions (60% Probability), Financing Plan a Will Produce