An oil-drilling company knows that it costs $25,000 to sink a test well. If oil is hit, the income for the drilling company will be $835,000. Ifonly natural gas is hit, the income will be $235,000. If nothing is hit, there will be no income. If the probability of hitting oil is 1/40 and if theprobability of hitting gas is 1/20, what is the expectation for the drilling company?$ 6875Should the company sink the test well?YesO No

From the given information, The probability of hitting the oil is 140 and the income for the oil hit…

Answered: An oil-drilling company knows that it…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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Similar questions

In a game you have a 1/99 probability of winning $500 and a 98/99 probability of losing $30. What is your expected value?
A game has an expected value to you of $400. It costs $400 to play, but if you win you receive $100,000 (including your $400 bet), for a net gain of $99,600. What is the probability of winning?
John and Larry are fundraisers for UNO. A wealthy benefactor says that he will match whatever John raises in the month of June – so if John raises 10,000 the benefactor will contribute an additional 10,000; if John raises 15,000, the benefactor will contribute an additional 15,000, etc. If John’s average monthly fundraising figure (expected value) is $25,000, and Larry’s is $30,000, what is the expected value for how much money UNO will raise in June?Explicitly state any properties of expectation you use to justify your conclusion.
Solve the question please
Suppose that you and a friend are playing cards and you decide to make a friendly wager. The bet is that you will draw two cards without replacement from a standard deck. If both cards are clubs, your friend will pay you $⁢41 . Otherwise, you have to pay your friend $⁢5 . Step 1 of 2 : What is the expected value of your bet? Round your answer to two decimal places. Losses must be expressed as negative values.
Suppose that you and a friend are playing cards and you decide to make a friendly wager. The bet is that you will draw two cards without replacement from a standard deck. If both cards are spades, your friend will pay you $⁢7. Otherwise, you have to pay your friend $2. Step 1 of 2 : What is the expected value of your bet? Round your answer to two decimal places. Losses must be expressed as negative values.
You have inherited a lottery ticket which might be a $10,000 winner. You have a 0.25 chance of winning the $10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket for $2,500 - What is your expected return and what should you do if are risk averse?
A certain model phone costs $599. The probability of the phone breaking over the course of a year is .07. What is the maximum amount you could pay for phone replacement insurance and still have a non-negative expected value on the policy? In other words, for what price or below would it be worth it to get the insurance?
You purchase a brand new car for $15,000 and insure it. The policy pays 78% of the car's value if there is an issue with the engine or 30% of the car's value if there is an issue with the speaker system. The probability of an issue with the engine is 0.009, and the probability there is an issue with the speaker system is 0.02. The premium for the policy is p. Let X be the insurance company's net gain from this policy. (a) Create a probability distribution for X, using p to represent the premium on the policy. Enter the possible values of X in ascending order from left to right. P(X) (b) Compute the minimum amount the insurance company will charge for this policy. Round your answer to the nearest cent
You flip two fair coins. If both coins land heads you win $2. Otherwise you lose $1. What is the expectation of this game? Round your answer to the nearest cent.
You have inherited a lottery ticket that may be a $5,000 winner. You have a 35% chance of winning the $5,000 and a 65% chance of winning $0. You have an opportunity to sell the lottery ticket for $1,500. What is your expected return and what should you do if are risk neutral?
Suppose best buy offers an extended warranty for $25 on an electronic device whose value is $250. Suppose best buy estimates the probability the item will be returned for a claim on that warranty is 5%. Assume that if an item is returned, best buy will refund the $250 purchase price. What is best buys expected value on the warranty?

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