Asked by Ashley Sedelnick on Mar 10, 2024



​You can either invest in project A or B.Project A could have a value of $150 with a probability of 0.1 or a value of $75 with probability 0.9.Project B could have a value of $120 with probability 0.2 or a value of $75 with a probability of 0.8.Which project should you invest in?

A) ​Project A
B) Project B
C) Neither of the projects
D) ​You cannot tell from the information presented


To assign financial resources with the aim of achieving a return or profit.


A measure of the likelihood of a specific event or outcome occurring, often expressed as a ratio or percentage.

  • Consider and make selections between diverse investment ventures by estimating their expected financial outcomes.

Verified Answer

Katie Westcott

Mar 10, 2024

Final Answer :
Explanation :
To determine the expected value (EV) of each project, we use the formula:
EV = (probability of outcome 1 x value of outcome 1) + (probability of outcome 2 x value of outcome 2)
For Project A:
EV = (0.1 x 150) + (0.9 x 75) = 22.5 + 67.5 = $90
For Project B:
EV = (0.2 x 120) + (0.8 x 75) = 24 + 60 = $84
Therefore, based on the expected value, it is better to invest in Project B.