MathCastle
Statistics & DataChallengeRandom Variables

Random Variables · Challenge problem

A company can invest in a project that gains $100\$100 thousand with probability 0.60.6 and loses $120\$120 thousand with probability 0.40.4, or it can decline and gain nothing. It chooses whatever has the larger expected value. A consultant offers a perfectly reliable forecast of whether the project will succeed, before the decision is made. What is the most, in thousands of dollars, the company should pay for the forecast?