Phil Dunphy, a real estate agent, is considering whether he should list an unusual $451,299 house for sale. If he lists it, he will need to spend $3,925 in advertising, staging, and fresh cookies. The current owner has given Phil 6 months to sell the house. If he sells it, he will receive a commission of $20,283. If he is unable to sell the house, he will lose the listing and his expenses. Phil estimates the probability of selling this house in 6 months to be 37%. What is the expected profit on this listing.

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ajeigbeibraheem ajeigbeibraheem · Answer 1 · 2020-10-21T08:59:29+02:00

Answer:

The expected profit on the listing is $5031.96

Step-by-step explanation:

Given that:

The probability of selling the house in 6 months is p = 0.37

The probability of not selling the house = 1 - 0.37 = 0.63

Suppose Y represents the profit on the listing,

Then: the expected profit on the listing can be computed as:

E(X) = ($20283* 0.37) - ($3925*0.63)

E(X) = $7504.71 - $2472.75

E(X) = $5031.96

Thus, the expected profit on the listing is $5031.96

andromache andromache · Answer 2 · 2022-03-22T13:03:45+01:00

The expected profit on the listing is $5031.96.

Since

The probability of selling the house in 6 months is p = 0.37

The probability of not selling the house = 1 - 0.37 = 0.63

here Y means the profit on the listing,

So, the expected profit is

E(X) = ($20283* 0.37) - ($3925*0.63)

E(X) = $7504.71 - $2472.75

E(X) = $5031.96

Thus, the expected profit on the listing is $5031.96.

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