1. Billings Company is considering leasing a computer for the next 3 years. Two computers are available. The net present value of leasing each computer in the next 3 years, under different business conditions, is summarized in the following table.
Business is
Good Bad
Plan A big computer 20,000 2,000
Plan B small computer 15,000 10,000
A consulting company estimates that the chances of having good and of having bad business are 80% and 20%, respectively. Compute the expected net present value of leasing a big computer. Compute the expected value of leasing a small computer. What are the variances of these two plans?
2. The makers of two kinds of cola are having a contest in the local shopping mall. Assume that 45% of the people in this region prefer brand A and 30 % prefer brand B. Ten local residents were randomly selected to test the colas. What is the probability that five of these 10 testers will prefer brand A?