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Scenario 5.2: Randy and Samantha are shopping for new cars (one each). Randy expects to pay $15.000 with 1/5 probability and
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Answer #1

Expected Expense for Samantha
E(x) = (P1 x X1) + (P2 x X2)
= (0.25 x 12,000) + (0.75 x 20,000)
E(x) = $18

Thus option (c) $18000 is correct.

Explanation :

P1= 1/4= 0.25

X1= $12000

P2= 3/4 =0.75

X2=$ 20,000

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