A store specializing in mountain bikes is to open in one of two malls. If the first mall is selected, the store anticipates a ye
arly profit of $1,425,000 if successful, and a yearly loss of $475,000 otherwise. The probability of success is .5. If the second mall is selected, it is estimated that the yearly profit will be $950,000 if successful; otherwise, the annual loss will be $285,000. The probability of success at the second mall is .34 What is the expected profit for the second mall?
In this case, we are only asked to have the account for the second shopping center, now we know that the data to take into account is if it is successful it would be 950,000 gains but if not, the losses will be 285,000. With the success rate it is 0.34, that is, the failure rate would be 1 - 0.34 = 0.66.
Then the gain of would be the weighted average of these values, like this:
