Question

Justin buys a racehorse for $25,000 and enters it in two races. He plans to sell the horse afterwards, hoping to make a profit. If the horse wins both races, its value will jump to $100,000. If the horse wins one of the races, it will be worth $60,000. If it loses both races, it will be worth only $15,000. Justin believes that there is a 25% chance the horse will win the first race and a 35% chance it will win the second race. Assume the two races are independent of one another. What is the the expected value?
A) $25,000
B) $201,000
C) $176,000
D) $41,562.50

Answer 1

The expected value is B