Cal has two choices. The first offers a 50% chance of winning $20 and a 50% chan

Question

Cal has two choices. The first offers a 50% chance of winning $20 and a 50% chance of losing $20. The second option offers a 20% chance of winning $100 and an 80% chance of losing $20. Which choice has the larger expected value? A.  The second option B.  The first option Cal has two choices. The first offers a 50% chance of winning $20 and a 50% chance of losing $20. The second option offers a 20% chance of winning $100 and an 80% chance of losing $20. Which choice has the larger expected value? A.  The second option B.  The first option

Explanation / Answer

Expected Value

E(x)=x*P(x)+y*P(y)

Expected Value of First offer=20*0.5+20*0.5=20

Expected Value of Second offer= 0.2*100+0.8*20=20+16=36

Second offer has higher expected value

so answer is A.

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