Question

QUESTION 1

(a) Mr Malusi is selling his business. A realtor promises that if Mr Malusi lists with her, the probability he will make $200 000 is 20%, that he will make $120 000 is 35%, that he will make $40 000 is 10%, and that he will break even is 15%. She concedes, however, that market conditions may go sour - if so, Mr Malusi has a 15% chance of losing $60 000 if he sells now - and there is even a chance he may lose $120 000. She claims, however, that there are no other possibilities. Let X be the amount of money Mr Malusi will make.

(I) What are the possible values X can take.

(II) Give the probability distribution function of X

(III)Calculate the mean value of X; that is, if she is correct and Mr Malusi lists with her, what is his expected profit

(IV) Calculate the variance of X

(V) Would you say that the distribution is symmetrical?

Answer 1