Question
John is interested in purchasing a multi-office building containing five offices. The current owner provides the...
John is interested in purchasing a multi-office building
containing five offices. The current owner provides the following
probability distribution indicating the probability that the given
number of offices will be leased each year.
| Number of Lease Offices | 0 | 1 | 2 | 3 | 4 | 5 |
| Probability | 2/7 | 3/35 | 6/35 | 1/7 | 9/35 | 2/35 |
If each yearly lease is $12,000, how much could John expect to
collect in yearly leases for the whole building in a given year?(in
dollars)
Homework Answers
Answer #1
| Number of lease offices (X) | 0 | 1 | 2 | 3 | 4 | 5 |
| Probability , P(X) | 2/7 | 3/35 | 6/35 | 1/7 | 9/35 | 2/35 |
So, Expected number of lease offices = E(X) = 
X * P(X) = 0 * 2/7 + 1 * 3/35 + 2 * 6/35 + 3 *1/7 + 4 * 9/35 + 5 *
2/35
= 2.17143
each yearly lease is $12,000
So , John could expect to collect in yearly leases for the whole building in a given year = 2.17143 * $12,000
= $ 26057.16 [Ans]
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