SOLUTION: A store specializing in mountain bikes is to open in one of two malls. If the first mall is selected, the store anticipates a yearly profit of $ 675,000 if successful and a yea
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Question 1138263: A store specializing in mountain bikes is to open in one of two malls. If the first mall is selected, the store anticipates a yearly profit of $ 675,000 if successful and a yearly loss of $ 225,000 otherwise. The probability of success is 1/2. If the second mall is selected, it is estimated that the yearly profit will be $ 450,000 if successful; otherwise, the annual loss will be $ 135,000. The probability of success at the second mall is 3/4.
a. What is the expected profit for the first mall?
b. What is the expected profit for the second mall?
Answer by Boreal(15235) (Show Source): You can put this solution on YOUR website!
This would be half of the difference of $225000
E(X)=0.5*(675)-0.5*225=337.5-112.5 or $225 thousands or $225,000.
The second is 450*(3/4)-135(1/4)=$303.75 thousands or $303,750.
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