Answer:
Expected value for the event = $148
Step-by-step explanation:
Expected value (EV) = Σ(Px*x)
Pr(rainy day) = 0.01
Px for rainy day = 0.01
Pr (sunny day) = 1-0.01 = 0.99
Px for sunny day = 0.99
If it's sunny, income = $200
Cost of preparation = $50
x for sunny day = 200-50 = 150
If it's rainy, income = $0
Cost of preparation = $50
x for sunny day = 0-50 = -50
EV =Σ(Px * x)
EV = (0.99*150)+(0.01*-50)
EV = 148.5+(-0.5) = 148.5-0.5
Expected value for the event = $148
