Evaluation of two projects has shown for Project X a return of £10m with a 0.8 probability and a return of 0 with probability 0.2, while Project Y has a return of £20m with a probability of 0.5 and a return of 0 with the same probability. What is the expected return?
A) £21m
B) £18m
C) £30m
D) £2m

Question

Quizplus · Accepted Answer

The expected return for Project X is:
0.8 x £10m + 0.2 x £0 = £8m

The expected return for Project Y is:
0.5 x £20m + 0.5 x £0 = £10m

Therefore, the best choice is Project Y with an expected return of £10m.

Evaluation of Two Projects Has Shown for Project X a Return