Solve the problem.
-At age 50, Ann must choose between taking $18,000 at age 60 if she is alive then, or $30,000 at age 70 if she is alive then. The probability for a person aged 50 living to be 60 and 70 is 0.81 and 0.61, Respectively. Using expected value, what is Annʹs best option?
A) $30,000 at age 70
B) $18,000 at age 60

Question

Quizplus · Accepted Answer

The expected value of taking $18,000 at age 60 is 0.81 * $18,000 = $14,580. The expected value of taking $30,000 at age 70 is 0.61 * $30,000 = $18,300. Therefore, Ann's best option is to take $30,000 at age 70.

Solve the Problem. -At Age 50, Ann Must Choose Between Taking $18,000 at Taking