You have invested in a project that has the following payoff schedule: Probability of
Payoff Occurrence
$40 .15
$50 .20
$60 .30
$70 .30
$80 .05
What is the expected value of the investment's payoff? (Round to the nearest $1.)
A) $60
B) $65
C) $58
D) $70

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each payoff by its probability and summing these products: (0.15 * $40) + (0.20 * $50) + (0.30 * $60) + (0.30 * $70) + (0.05 * $80) = $6 + $10 + $18 + $21 + $4 = $59. Rounding to the nearest $1 gives $59, which is closest to option C, $58.

You Have Invested in a Project That Has the Following