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Question

Strawberry Frams Inc. loses $30 on rainy days and gains $120 on days when it does not rain. If the probability of rain is 0.15, what is the expected value of net profit? Use standard (U.S.) monetary format, with no blank between the $ sign and the value.

Answer 1

(Net Profit) = (Income) - (Loss)
(Income) = (Probability of sun) * ($ for sun)
= (1-0.15) * ($120) = $102.00
(Loss) = (Probability of rain) * ($ for rain)
= (0.15) * ($30) = $4.50

Therefore expected net profit = ($102.00) - ($4.50) = $97.50

Answer 2

$90