Find the expected value.
-Mr.Cameron is sponsoring an summer concert.He estimates that he will make $300,000 if it does not rain and make $60,000 if it does rain.The weather bureau predicts the chance of rain is 0.34 for the day of the concert.An insurance company is willing to insure the concert for $150,000 against rain for a premium of $30,000.If he buys this policy,what are his expected earnings from the concert?
A)$239,400
B)$180,000
C)$300,000
D)$270,000

Question

Quizplus · Accepted Answer

The expected earnings without insurance are: (0.66 * $300,000) + (0.34 * $60,000) = $198,000 + $20,400 = $218,400. With insurance, if it rains, he gets $150,000 from insurance, so his earnings are $150,000 - $30,000 (premium) + $60,000 = $180,000. If it doesn't rain, he earns $300,000 - $30,000 (premium) = $270,000. The expected earnings with insurance are: (0.66 * $270,000) + (0.34 * $180,000) = $178,200 + $61,200 = $239,400.

Find the Expected Value