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Paul Hunt is considering two business ventures. The anticipated returns (in thousands of dollars) of each venture are described by the following probability distributions. Venture A Earnings Probability -10 0.3 50 0.4 60 0.3 Venture B Earnings Probability -5 0.1 30 0.3 40 0.6 (a) Compute the mean and variance for Venture A. mean dollars variance dollars? Compute the mean and variance for Venture B. mean dollars variance dollars? (b) Which investment would provide Paul with the highest expected return (the greater mean)? O venture A O venture B (c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)? O venture A

Paul Hunt is considering two business ventures. The anticipated returns (in thousands of dollars) of each venture are described by the following probability distributions. Venture A Earnings Probability -10 0.3 50 0.4 60 0.3 Venture B Earnings Probability -5 0.1 30 0.3 40 0.6 (a) Compute the mean and variance for Venture A. mean dollars variance dollars? Compute the mean and variance for Venture B. mean dollars variance dollars? (b) Which investment would provide Paul with the highest expected return (the greater mean)? O venture A O venture B (c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)? O venture A

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Paul Hunt is considering two business ventures. The anticipated returns (in thousands of dollars) of each venture are described by the following probability distributions. Venture A Earnings Probability -10 0.3 50 0.4 60 0.3 Venture B Earnings Probability -5 0.1 30 0.3 40 0.6 (a) Compute the mean and variance for Venture A. mean dollars variance dollars? Compute the mean and variance for Venture B. mean dollars variance dollars? (b) Which investment would provide Paul with the highest expected return (the greater mean)? O venture A O venture B (c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)? O venture A O venture B
Transcribed Image Text:Paul Hunt is considering two business ventures. The anticipated returns (in thousands of dollars) of each venture are described by the following probability distributions. Venture A Earnings Probability -10 0.3 50 0.4 60 0.3 Venture B Earnings Probability -5 0.1 30 0.3 40 0.6 (a) Compute the mean and variance for Venture A. mean dollars variance dollars? Compute the mean and variance for Venture B. mean dollars variance dollars? (b) Which investment would provide Paul with the highest expected return (the greater mean)? O venture A O venture B (c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)? O venture A O venture B
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