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Tcecarenko [31]
3 years ago
14

Under normal conditions (70% probability), Plan A will produce $20,000 higher return than Plan B. Under tight money conditions (

30% probability), Plan A will produce $100,000 less than Plan B. What is the expected value of returns?
A. ($16,000)
B. ($2,000)
C. $28,000
D. $58,000
Business
1 answer:
Lorico [155]3 years ago
3 0

Answer:

A. ($16,000)

Explanation:

The computation of the expected value of return equal to

=  (Higher return × probability rate) - (Less return -  probability rate)

= ($20,000 × 70%) - ($100,000 × 30%)

= $14,000 - $30,000

= - $16,000

For computing the correct value we have to deduct the tighter money conditions from the normal conditions.

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Explanation:

The complete question is

Bruce takes out a personal loan of $1,000 to go on a trip to Florida. His loan has an annual compound interest rate of 10%. The loan compounds once each year.  When you calculate Bruce's debt, be sure to use the formula for annual compound interest.

Bruce borrowed $1,000 for his trip.

If Bruce waits for five years to begin paying back his loan, how much will he owe?

we know that    

The compound interest formula is equal to  

 

where  

A is the Final amount owed  

P is the amount of money borrowed  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

 

substitute in the formula above  

 

 

 

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If an = 3n - 2 , find a2If an = 3n - 2 , find a2

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