An individual is indifferent between receiving a guaranteed amount of $1,000 and taking a chance of receiving $1,500 with probability 0.75 and losing $800 with probability 0.25.What is the expected value of this gamble?

A) $1,000
B) $740
C) $925
D) $650

Expected Value

The anticipated value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.

Guaranteed Amount

A certain sum of money promised to an individual or entity under specific conditions or agreements.

Receiving

The process of accepting goods delivered by suppliers and checking them for order accuracy and quality.