Under normal conditions (70% probability), Plan A will produce a $20,000 higher return than Plan B. Under tight money conditions (30% probability), Plan A will produce $100,000 less than Plan B. What is the expected value of return?
A) $28,000
B) ($16,000)
C) $44,000
D) ($2,000)

Question

Quizplus · Accepted Answer

Expected value = ($+20,000)(0.7) + (−$100,000)(0.3) = ($16,000)

Under Normal Conditions (70% Probability), Plan a Will Produce a $20,000