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 -30 0.4 50 0.3 60 0.3 Venture B Earnings Probability -15 0.1 20 0.4 30 0.5 (a) Compute the mean and variance for Venture A. mean dollars variance dollars2 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

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...
icon
Related questions
Question
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
-30
0.4
50
0.3
60
0.3
Venture B
Earnings
Probability
-15
0.1
20
0.4
30
0.5
(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)?
Venture A
Venture B
(c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)?
Venture A
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 -30 0.4 50 0.3 60 0.3 Venture B Earnings Probability -15 0.1 20 0.4 30 0.5 (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)? Venture A Venture B (c) In which investment would the element of risk be less (that is, which probability distribution has the smaller variance)? Venture A Venture B
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps

Blurred answer
Knowledge Booster
Research Ethics
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, probability and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
Probability
ISBN:
9780134753119
Author:
Sheldon Ross
Publisher:
PEARSON
A First Course in Probability
A First Course in Probability
Probability
ISBN:
9780321794772
Author:
Sheldon Ross
Publisher:
PEARSON