Use the following to answer the questions below.
In choosing between three new jobs, Joe MBA considers the potential payoffs over the next three years. The following table contains the payoffs, given the speed of promotion in each of the organizations. The probability of fast promotion is 0.6, and the probability of slow promotion is 0.4.

-Use the information in Table A.3 and the expected-value rule. Which statement is True?
A) The expected value of the consultant job is more than $300,000.
B) The expected value of the utility analyst job is more than $300,000.
C) The expected value of the research assistant job is less than $250,000.
D) The job with the highest expected value is the research assistant.

Question

Use the following to answer the questions below.
In choosing between three new jobs, Joe MBA considers the potential payoffs over the next three years. The following table contains the payoffs, given the speed of promotion in each of the organizations. The probability of fast promotion is 0.6, and the probability of slow promotion is 0.4.
 
-Use the information in Table A.3 and the expected-value rule. Which statement is True?
A) The expected value of the consultant job is more than $300,000. 
B) The expected value of the utility analyst job is more than $300,000. 
C) The expected value of the research assistant job is less than $250,000. 
D) The job with the highest expected value is the research assistant.

Quizplus · Accepted Answer

To calculate the expected value, we multiply the potential payoffs by their respective probabilities and add them up. 
For the consultant job: 
(0.6 x $400,000) + (0.4 x $200,000) = $320,000
For the utility analyst job: 
(0.6 x $300,000) + (0.4 x $250,000) = $285,000
For the research assistant job: 
(0.6 x $200,000) + (0.4 x $150,000) = $180,000
Thus, the expected value of the utility analyst job is more than $300,000. Hence,  Choice B is the correct answer.

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