Consider the Following Scenario to Answer the Questions That Follow

question 124

Multiple Choice

Consider the following scenario to answer the questions that follow.
Suppose that in an experimental setting, 100 students are asked to choose between Gamble A and Gamble B, where:
Gamble A: The student will receive $50 with a 70% probability and $100 with a 30% probability.
Gamble B: The student will receive $50 with a 50% probability, $200 with a 25% probability, and $0 (nothing) with a 25% probability.
-Which of the following shows the correct formula for the expected value (EV) of Gamble A?

• A) EV = 0.7 × ($50) + 0.3 × ($100)
• B) EV = 0.5 × ($50) + 0.3 × ($100)
• C) EV = 0.7 × ($50) + 0.5 × ($100)
• D) EV = 0.5 × ($50) + 0.5 × ($100)
• E) EV = 0.1 × ($50) + 0.2 × ($100)