Which of the following has a larger expected loss?
Option 1: A sure loss of $740.
Option 2: A 25% chance to lose nothing, and a 75% chance of losing $1000.
A) Option 1
B) Option 2
C) The two expected earnings are equal.

Question

Quizplus · Accepted Answer

The expected loss for Option 2 is calculated as (0.25 * $0) + (0.75 * $1000) = $750, which is larger than the sure loss of $740 in Option 1.

Which of the Following Has a Larger Expected Loss