Question

A mining company is considering two sites on which to dig, described as follows:

Site A:
Profit if diamonds are found = $70 million.
Loss if no diamonds are found = $15 million.
Probability of finding diamonds = 0.2

Site B:
Profit if diamonds are found = $140 million.
Loss if no diamonds are found = $21 million.
Probability of finding diamonds = 0.1

What is the expected profit for each site?

Answer 1

A

site A: $2 million; site B: $14 million
B

site A: $14 million; site B: $14 million
C

site A: $14 million; site B: –$4.9 million
D

site A: $2 million; site B: –$4.9 million

Answer 2

I believe it is that, but give me another minute first to verify it.

Answer 3

uhm the first one is comes out 11 million?

Answer 4

ur right, sorry.

Answer 5

and the second comes out 11,900,000

Answer 6

It should be 14 million for both.
the profit is simply
Site A = 70 million x 0.2 = 14 million
Site B = 140 million x 0.1= 14 million

Answer 7

Is that the correct answer? If that's so, then the loss wouldn't have to be accounted for.

Answer 8

thanks

Answer 9

no problem :)