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Calculate the expected value and the variance of jane income

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Reference no: EM131165667

Jane just inheritated a vineyard from a distant relative. In good years (when there is no rain during harvest season) she earns R100 00 from the sale of grapes from the vineyard. If the weather is poor she loses R20 000. Jane's estimate of the probability of good weather is 60%

i) Calculate the expected value and the variance of Jane's income from the vineyard

ii) Jane is risk averse. Ethan a grape buyer, offers Jane a guaranteed payment of R70 000 each year in exchange for her entire harverst. Will Jane accept this offer? Explain

iii) Why might Ethan make such an offer?

Reference no: EM131165667

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