If the probability of outcome 1 is 0.75 with an expected payoff of $5000, and the probability of outcome 2 is 0.25 with an expected payoff of $20,000, then the expected value of the outcome is

0 votes
     ($5,000 + $20,000)/2=$12,250.
      (0.75x$5000) + (0.25x$20,000) = $9,375.
      (0.75x$5000 + 0.25x$20,000)/2 = $4,375.
      ($5000/0.75) + ($20,000/0.25) = $86,667.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

0 votes
(0.75x$5000) + (0.25x$20,000) = $9,375.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

Related questions




...