Consider the Following Scenario When Answering the Following Questions

question 48

Multiple Choice

Consider the following scenario when answering the following questions:
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 percent probability and $100 with a 30 percent probability.
Gamble B: The student will receive $50 with a 50 percent probability,$200 with a 25 percent probability,and $0 (nothing) with a 25 percent probability.
-Which of the following formulas shows the correct formula for the expected value (EV) of Gamble B?

• A) EV = 0.5 *($50)+ 0.25 * ($25)
• B) EV = 0.5 *($50)+ 0.25 * ($100)+ 0.25 * ($250)
• C) EV = 0.5 *($50)+ 0.5 * ($200)
• D) EV = 0.5 *($50)+ 0.25 * ($200)
• E) EV = 0.25 *($50)+ 0.25 * ($200)

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