John is watching an old game show on rerun television called Let’s Make a Deal in...

John is watching an old game show on rerun television called Let’s Make a Deal in which you have to choose a prize behind one of two curtains. Behind one of the curtains is a gag prize worth $ 150, and behind the other is a round-the-world trip worth $7,200. The game show has placed a subliminal message on the curtain containing the gag prize, which makes the probability of choosing the gag prize equal to 75 percent. What is the expected value of the selection, and what is the standard deviation of that selection?

Expert Solution

If probability of the gag prize is 75% then probability for round the world is 25%
Probability	Value	Prob.* Value	Variance
0.75	150	112.50	2,329,804.69
0.25	7,200	1,800.00	6,989,414.06
Expected Value=.75150+.257200				1,912.50
Variance=.75(150-1912.5)^2+.25(7200-1912.5)^2				9,319,218.75
Standard Deviation=(9319218.75)^(1/2)				3,052.74

jeff jeffy answered 2 years ago

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