Which of the following is an example of a situation in which the law of large numbers does not apply to the expected-value decision principle?
A) The investment decision is a once-in-a-lifetime opportunity.
B) Average return expected of a project is low.
C) The project requires a series of investments over the years.
D) Average return expected of a project is high.

Question

Quizplus · Accepted Answer

The law of large numbers assumes that the more times an event is repeated, the closer the outcome will be to the expected value. However, in a once-in-a-lifetime opportunity, there is no opportunity for the law of large numbers to apply. Therefore, the expected-value decision principle may not be applicable in this scenario.

Which of the Following Is an Example of a Situation