Question

Mrs. Coulter is a realtor who takes the listing on a house with a sale price of $185,000 knowing

that she will spend $800 trying to sell the house. Three outcomes are possible   

A).  There is a 0.50 probability that she will sell the house herself and earn 6% of sell price.

B). There is a 0.30 probability that another realtor will sell the house and Mrs. Coulter will earn 3% of the sell price.

C). There is a 0.20 probability that the house will not sell after 6 months and Mrs. Coulter will lose the listing.

What is the expected profit from listing the house?

                                                                                         

Answer 1

There is a probability of 0.50 for earning 6% profit with.. 6% means 185000x = 11100$

There is probability of 0.30 for earning 3% profit with ...6% means 158x =5550$

There is a 0.20 proabability of loosing $ 800

Actually She will loose $800 in the three scenario so the profit in the first case will be 11100-800=10300

Second case will be 5550-800=4750

So the expected profit = .5x10300+ .3x4750 - 0.2 x 800=5150+1425-160= 5775