Which of the following chances has the biggest expected return?
A) a 60% chance of winning $2,400 and a 40% chance of winning $0
B) a 100% chance of getting $1,200
C) a 50% chance of winning $1,200, 20% chance of winning $2,400 and a 30% chance of losing $2,400
D) All of the above have the same expected return.

Question

Quizplus · Accepted Answer

To calculate the expected return, we multiply each possible outcome by its respective probability and then add them together. 
For option A: 
Expected Return = (0.6 * $2,400) + (0.4 * $0) = $1,440
For option B: 
Expected Return = (1 * $1,200) = $1,200
For option C:
Expected Return = (0.5 * $1,200) + (0.2 * $2,400) + (0.3 * -$2,400) = -$240
Therefore, option A has the highest expected return of $1,440.

Which of the Following Chances Has the Biggest Expected Return