finanicial expectation q for general maths! HELP! (1 Viewer)

[littlej123]

okay so...

in a business venture there is a 40% chance of making a profit of $50 000, a 25% chance of making neither a profit or a loss and a 35% chance that the business will incur a loss of $40000. What is the financial expectation of this business venture?

 

[SpreadTheWord]

My guess, it's probably wrong so clarify before you proceed. If what i do is correct, then it looks trickier than it actually is. So 40% chance of $50000, take away the 35% chance of $40000 leaves $10000. Now there is any 25% chance of no change, so therefore you will have a £10000 financial expectation?

Please correct me if i am wrong. But if possible check with your teachers.

 

[littlej123]

not right according to answers!

 

[timmyt]

This is how you answer it...

(0.4x50000)+(0.25x0)-(0.35x40000) = $6000

This is because there is a 40% chance of 50000, which means 0.4x50000 will give you the individual expectation of that result. When you keep on going (make sure you minus the (0.35x40000) seeing as it is an expected LOSS) and adding the various expectations together, you will end up with the final expectation of 6000

Hope that helped..

 

[SpreadTheWord]

not right according to answers!

Follow the answers then mate. What does it say though? I want to know for future purposes.

 

[littlej123]

this is how you answer it...

(0.4x50000)+(0.25x0)-(0.35x40000) = $6000

this is because there is a 40% chance of 50000, which means 0.4x50000 will give you the individual expectation of that result. When you keep on going (make sure you minus the (0.35x40000) seeing as it is an expected loss) and adding the various expectations together, you will end up with the final expectation of 6000

hope that helped..

thankyouuuu