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A contractor must pay a $40,000 penalty if construction of an expensive home requires more than 16 weeks. He will receive a bonus of $10,000 if the home is completed within 8 weeks. Based on experience with this type of project, the contractor feels there is a 0.2 chance the home will require more than 16 weeks for completion, and there is a 0.3 chance it will be finished within 8 weeks.

If the price of the home is $350,000 before any penalty or bonus adjustment, how much can the buyer expect to pay for her new home when it is completed?

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Statistics and Probability, Statistics

Category:- Statistics and Probability
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