document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=885455>Question 885455</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Solve the problem.\r<BR>\n" );
document.write( "\n" );
document.write( "A mining company is considering two sites on which to dig, described as follows:\r<BR>\n" );
document.write( "\n" );
document.write( "Site A: Profit if diamonds are found: $80 million.<BR>\n" );
document.write( "  Loss if no diamonds are found: $15 million.<BR>\n" );
document.write( "  Probability of finding diamonds: 0.2<BR>\n" );
document.write( "Site B: Profit if diamonds are found $100 million.<BR>\n" );
document.write( "  Loss if no diamonds are found $16 million.<BR>\n" );
document.write( "  Probability of finding diamonds: 0.1<BR>\n" );
document.write( " </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #535170 by </B><A HREF=/tutors/aboutme.mpl?userid=DrBeeee><B>DrBeeee(684)</B></A><img src=\"/images/stars/stars-11.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=DrBeeee><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/images/nopicture.jpg><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=535170\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> The expected return is given by<BR>\n" );
document.write( "(1) E(return) = Prob(return)*Amount of return, and the expected gain is the expected return minus the cost.<BR>\n" );
document.write( "At site A we get<BR>\n" );
document.write( "(2) E(return at A) = 0.2*80 mil or<BR>\n" );
document.write( "(3) E(return at A) =  16 mil <BR>\n" );
document.write( "(4) E(gain at A) = 16 - 15 or<BR>\n" );
document.write( "(5) E(gain at A) = 1 mil<BR>\n" );
document.write( "At site B we get<BR>\n" );
document.write( "(2) E(return at B) = 0.1*100 mil or<BR>\n" );
document.write( "(3) E(return at B) =  10 mil <BR>\n" );
document.write( "(4) E(gain at B) = 10 - 16 or<BR>\n" );
document.write( "(5) E(gain at B) = -6 mil<BR>\n" );
document.write( "CLearly you would dig at site A. </SPAN>\n" );
document.write( "</TD></TR></TABLE>\n" );