Question

You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted to medical school is about 14 percent. If you are accepted to medical school, then your starting salary when you graduate will be $321,000 per year. However, if you are not accepted, then you would choose to work in a zoo, where you will earn $33,000 per year. Without considering the additional years, you would spend in school if you study medicine or the time value of money. What is your expected starting salary? (Round answer to 2 decimal places, e.g. 15.25.) Expected starting salary $ LINK TO TEXT What is the standard deviation of that starting salary? (Round answer to 2 decimal places, e.g. 15.25.) Standard deviation $

Answer 1

Solution a) Expected Salary = Sum of the product of probabilities and salaries

= 14%*321,000 + 86%* 33,000

= 44940 + 28380

= $73,320

Solution b) The variance of the salary (σ^2) can be calculated as:

= 14%*(321,000 - 73,320)^2 + 86%*(33,000 - 73,320)^2

= 14%*(247680)^2 + 86%*(-40320)^2

= 14%*61345382400 + 86%*1625702400

= 8588353536 + 1398104064

= 9986457600

Standard Deviation, σ = Sqrt(Variance of the salary)

= Sqrt(9986457600)

= $99932.27

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