CA Foundation · Quantitative Aptitude · Probability
A trader in Surat buys a lot of sarees. The profit is ₹40,000 with probability 0.5, ₹10,000 with probability 0.3 and a loss of ₹20,000 with probability 0.2. What is the expected profit?
The expected profit is ₹19,000. Multiply each outcome by its probability: 20,000 plus 3,000 minus 4,000 for the loss. The loss must carry a negative sign.
- A₹17,000
- B₹19,000Correct
- C₹21,000
- D₹23,000
Explanation
Expected profit = 40,000(0.5) + 10,000(0.3) + (-20,000)(0.2) = 20,000 + 3,000 - 4,000 = 19,000. Check: probabilities sum to 1. Treating the loss as positive would give 27,000, which is wrong.
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