Calculate the expected value of undertaking

Reference no: EM1396599

In a crime ridden neighborhood, a thief is trying to decide whether or not to rob a local bank today. From experience, the thief knows that with probability 0.5 a local bank will have an ‘anti-thief protection plan' in which case he will get caught. If he gets caught, he will have to pay 1000 US dollars in bail charges. If he succeeds he will obtain 2000 US dollars. Assume that the thief currently has 1500 US dollars in his pocket. Calculate the expected value of this undertaking (make sure to take into account the thief's initial wealth).

Reference no: EM1396599

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