A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value for an annuity (series of paym
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Answer:
The expected profit will be of 700 dollars
Explanation:
The expected profit will be the multiplication of the outcomes by their probability:
We have 10% chance of selling <u>zero </u>thus:
1,000(0) + 200(3-0) - 1,500 = -900
We have 20% chance of selling <u>one </u>thus:
1,000(1) + 200(3-1) - 1,500 = -100
We have 30% chance of selling <u>two </u>thus:
1,000(2) + 200(3-2) - 1,500 = 700
We have 40% chance of selling <u>all </u>thus:
1,000(3) + 200(3-3) - 1,500 = 1,500
We add each weighted profit to get the expected result:
-90 - 20 + 210 + 600 = 700