Solve the Problem. -A Contractor Is Considering a Sale That Promises a Profit

question 145

Multiple Choice

Solve the problem.
-A contractor is considering a sale that promises a profit of $23,000 with a probability of 0.7 or a loss (due to bad weather, strikes, and such) of $13,000 with a probability of 0.3. What is the expected profit?

• A)$12,200
• B)$25,200
• C)$16,100
• D)$10,000

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Definitions:

Deferred Ordinary Annuity

A financial product where regular payments are deferred to start at a future date, often used for retirement savings.

Present Value

The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.

Compounded Quarterly

Refers to the method of calculating interest where the accumulated interest is added to the principal amount at the end of each quarter, and then new interest is calculated on the new total.

Compound Interest Tables

Tables used to find the future value of an investment based on compound interest, which includes interest earned on both the principal and previously earned interest.