Answer:
The expected profit is $10,600.
Step-by-step explanation:
The expected profit can be calculated as the sum of the possible outcomes weighted by their probability of occurrence.
In this case, there are four possible outcomes:
1) The horse win both races. The value of the horse will be $100k-$20k=$80k.
The probability of this outcome is:
2) The horse win the first race, but lose the second one. The value will be $50k-$20k=$30k.
The probability is:
3) The horse lose the first race, but win the second one. The value will be $50k-$20k=$30k.
The probability is:
4) The horse lose both races. The value will be $10k-$20k=-$10k.
The probability is:
Then, the expected profit can be calculated as: