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Problem

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question

A company has a choice of three investment schemes. Option I gives a sure $25,000 return on investment. Option II gives a 50% chance of returning $50,000 and a 50% chance of returning $10,000. Option III gives a 5% chance of returning $100,000 and a 95% chance of returning nothing. Which option should the company choose?
Plain-text mathematical notation (without MathML)
A company has a choice of three investment schemes. Option I gives a sure $25,000 return on investment. Option II gives a 50% chance of returning $50,000 and a 50% chance of returning $10,000. Option III gives a 5% chance of returning $100,000 and a 95% chance of returning nothing. Which option should the company choose?
Original LaTeX notation
A company has a choice of three investment schemes. Option I gives a sure $25,000 return on investment. Option II gives a 50% chance of returning $50,000 and a 50% chance of returning $10,000. Option III gives a 5% chance of returning $100,000 and a 95% chance of returning nothing. Which option should the company choose?

choices

  1. Option II if it wants to maximize expected return
  2. Option I if it needs at least $20,000 to pay off an overdue loan
  3. Option III if it needs at least $80,000 to pay off an overdue loan
  4. All of the above answers are correct.

subject

high_school_statistics

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