The budgeting process for a college results in an expenseforecast for the coming

Question

The budgeting process for a college results in an expenseforecast for the coming year (in millions) of 9, 10, 11, 12, and 13million . Because the actual expenses are known , the followingprobabilities are assigned respectively: .3, .2, .25, .05, and.2.
If the income projection for the year are estimated to be 12million, what is the expected value of the expense forecastfor the coming year? What is the financial state of thecollege? The budgeting process for a college results in an expenseforecast for the coming year (in millions) of 9, 10, 11, 12, and 13million . Because the actual expenses are known , the followingprobabilities are assigned respectively: .3, .2, .25, .05, and.2.
If the income projection for the year are estimated to be 12million, what is the expected value of the expense forecastfor the coming year? What is the financial state of thecollege?

Explanation / Answer

x

P(X = x)

9

0.30

10

0.20

11

0.25

12

0.05

13

0.20

E(X) = xP(X = x) = 9 * 0.30 + 10 * 0.20 + 11 * 0.25 + 12* 0.05 + 13 * 0.20= $10.65million

12 – 10.65 = $1.35 million dollars

x

P(X = x)

9

0.30

10

0.20

11

0.25

12

0.05

13

0.20

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