Question

A woman can earn Php50,000 in one year with a probability of 0.35 or lose Php15,000 over the same period with a probability of 0.65 by investing in the stocks of a certain company. Compute her expected earnings from this investment.

Answer 1

Let $X=$ the amount of money received

$$P(win)=0.35$$

$$P(lose)=0.65$$

$$E(X)=\sum_ix_ip(x_i)$$

$$=0.35(50000)+0.65(-15000)=7750$$

Her expected earnings from this investment is Php7750.