Use the Following to Answer Questions

question 175

Multiple Choice

Use the following to answer questions:
Scenario: Health Costs
Alan is hoping for a healthy year, meaning that he would have zero health costs. Given his habits, there is a 40% chance that Alan will develop a health issue resulting in $50,000 in health costs. Assume these are the only two conditions that could exist for Alan in the coming year.
-(Scenario: Health Costs) Look at the scenario Health Costs. Given the fact that Alan has a 40% chance of developing a health problem, what is the expected value of Alan's health care costs for the coming year?

• A) $0
• B) $50,000
• C) $20,000
• D) $16,000

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Definitions:

Budget

An estimate of income and expenditure for a set period of time, often used as a plan for financial management and goal setting.

Allocation

The distribution of resources or tasks among individuals, groups, or organizations based on a plan or a set of priorities.

Forecasting

The process of making predictions about the future based on past and present data, often used in planning and decision making.

Economic Downturn

A period of declining economic performance across a broad area, such as a country or multiple countries, characterized by reduced spending and increased unemployment.