Question

A salesperson for a medical device company has two appointments on a given day. At the first appointment, he believes that he has a 70% chance to make the deal, from which he can earn $1000 commission if successful. On the other hand, he thinks he only has a 40% chance to make the deal at the second appointment, from which, if successful, he can make $1500. What is his expected commission based on his own probability belief? Assume that the appointment results are independent of each other. 

Answer 1

Probability of earning $1000 commission =$0.70$

Probability of earning $1500 commission = $0.40$

Expected commission based on his own probability $= ( 0.70\times1000) + ( 0.40\times1500 )$

$= 700 + 600\\ = 1300$

Hence Expected commission is $1300.