question archive Asa buys a painting
Asa buys a painting
Subject:EconomicsPrice:2.86 Bought3
Asa buys a painting. There is a 30?% probability that the artist will become famous and the painting will be worth ?$9000. There is a 13?% probability that the painting will be destroyed by fire or some other disaster. If the painting is not destroyed and the artist does not become? famous, it will be worth
?$4500.
The expected value of the painting is ?BLANK ?(round your answer to the nearest? penny)
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Answer:
To calculate the expected value of the painting, just sum the product of the probabilities and the respective value of the paintings.
E(X) = 0.30 (9000) + 0.13 (0) + (1 - 0.30 -.13) (4500)
= 2700 + 0 + 0.57 (4500)
= 2700 + 0 + 2565 = $5265
Answer: The expected value of the painting is $5265
