Question
In: Finance
Assume that the following probability distribution exists for automobile damages Possible Outcomes for Damages Probability $0...
Assume that the following probability distribution exists for automobile damages
| Possible Outcomes for Damages | Probability |
| $0 | 50% |
| 600 | 30% |
| 2,000 | 10% |
| 7,000 | 6% |
| 11,000 | 4% |
What is the expected value for damages?
A. $12.40
B. $124
C. 1,240
D. 12,400
Can someone please explain how you got the answer. I'm stuck
Solutions
Expert Solution
Expected Value = 
Possible outcomes * Probability
| Possible Outcomes | Probability | Probability*Possible Outcomes |
| - | 0.50 | - |
| 600 | 0.30 | 180.00 |
| 2,000 | 0.10 | 200.00 |
| 7,000 | 0.06 | 420.00 |
| 11,000 | 0.04 | 440.00 |
Expected Value =
Possible outcomes * Probability
= 0+180+200+420+440
= $1,240 (option C)
jeff jeffy answered 1 year agoRelated Solutions
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