An architect is considering bidding for the design of a new shopping mall. The cost of drawing plans and submitting a model is $10,000. The probability of being awarded the bid is 0.11, and anticipated profits are $100,000, resulting in a possible gain of this amount minus the $10,000 cost for plans and a model. What is the expected value in this situation?

Question

anonymous · Answer

He has an 11% chance of getting that $100,000.  So the expected value of the whole deal will be:
100,000 * 0.11 - 10,000 = 1000

anonymous · Answer

We roll a pair of dice. If the sum of the dice is 7, you pay me $25. If the sum is not 7, I pay you the number of dollars indicated by the sum of the dice. What is your expected value for the game?