Determine the expected value of option

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Reference no: EM133081775

Consider the two options in the following table, both of which have random outcomes:

Option 1

Option 2

Probability of Outcome

Possible Outcomes ($)

Probability of Outcome

Possible Outcomes ($)

1/16

150

1/5

120

4/16

300

1/5

255

6/16

750

1/5

1,500

4/16

300

1/5

255

1/16

150

1/5

120

a. Determine the expected value of each option.

Expected value of Option 1: $ _____________

Expected value of Option 2: $ _______________

b. Determine the variance and standard deviation of each option.

Instructions: Round your answers for standard deviation to two decimal places.

Variance of Option 1: ________

Standard deviation of Option 1: ____________

Variance of Option 2: _____________

Standard deviation of Option 2: ______________

c. Which option is most risky?

multiple choice

  • Option 1
  • Option 2

Reference no: EM133081775

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