Managerial Economics 12th Edition by Mark Hirschey

Exercise 3

Expected Value. Perry Chandler, a broker with Caveat Emptor, Ltd., offers free investment seminars to local PTA groups. On average, Chandler expects 1 percent of seminar participants to purchase $25,000 in tax-sheltered investments and 5 percent to purchase $5,000 in stocks and bonds. Chandler earns a 4 percent net commission on tax shelters and a 1 percent commission on stocks and bonds. Calculate Chandler's expected net commissions per seminar if attendance averages 10 persons.