Answer:
$6,200
Step-by-step explanation:
The question is to find the expected value.
We know the expected value of a scenario is the sum of the products of each probability of event and its profit or loss.
There are 3 probabilities in the scenario:
Rainy: 20% = 20/100 = 0.2
Sunny: 50% = 50/100 = 0.5
Cloudy: Rest, which is 100 - (50+20) = 100 - 70 = 30% = 30/100 = 0.3
Now, the gain and loss is:
Rainy: Lose 5000 means -5000
Cloudy: Gain 4000 means +4000
Sunny: Gain 12,000 means +12,000
Now, the expected value is:
Expected Value = (0.2)(-5000) + (0.5)(12000) + (0.3)(4000) = $6,200
