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?
A) $34,000
B) $4,000
C) $4,800
D) $2,000

Question

Quizplus · Accepted Answer

Expected value = (+$30,000)(0.6) + (−$40,000)(0.4) = $2,000

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