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31 July, 21:52

A cd has 5% chance of being a smash hit an profiting $5.2 million a 50% chance of being a modest success and profiting $0.9 million and a 45% chance of being a flop what is the expected earning value of the cd

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  1. 31 July, 22:43
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    710,000

    Step-by-step explanation:

    P (S) = Probability of Smash = 0.05 (5%)

    P (M) = Probability of Modest = 0.5 (50%)

    P (F) = Probability of Flop = 0.45 (45%)

    Use the discrete random variable model,

    E (X) = (0.05 * 5.2) + (0.5 * 0.9) + (0.45 * 0)

    = 0.26 + 0.45 + 0 = 710,000
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