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Suppose it costs $2,500 to buy a defibrillator. Find the expected value of owning a defibrillator if there is a 4% probability that Johnson Club will lose a lawsuit regarding its operation, with each lawsuit resulting in Johnson Club being liable in the amount of $1,000,000.

Respuesta :

MathPhys

Answer:

$37,500

Step-by-step explanation:

Expected value is the sum of the outcomes times their probability.

E(X) = (-2500) (1) + (1,000,000) (0.04)

E(X) = 37,500

Another way of calculating it:

E(X) = (-2500+0) (0.96) + (-2500+1,000,000) (0.04)

E(X) = 37,500

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