Which of the following has a higher expected earning?
Option 1: A gift of $240, guaranteed.
Option 2: A 25% chance to win $1,000, and a 75% chance of getting nothing.
A) Option 1
B) Option 2
C) The two expected earnings are equal.

Question

Quizplus · Accepted Answer

The expected earning for Option 2 is calculated as (0.25 * $1,000) + (0.75 * $0) = $250, which is higher than the guaranteed $240 from Option 1.

Which of the Following Has a Higher Expected Earning