Suppose a company in the US is buying some parts from a supplier in Japan. The U

Question

Suppose a company in the US is buying some parts from a supplier in Japan. The US firm has to pay for the parts next month. Suppose they believe the value of the yen dollar exchange rate in 1 month is given by the following probability distribution: the believe there is a probability 0.24 that $1 will exchange for 85 yen, there is a probability of 0.23 that $1 will exchange for 90 Yen, there is a probability of 0.35 that $1 will exchange for 95 yen, and with the remaining probability that $1 will exchange for 100 yen. What is the expected value of he number of yen that $1 will exchange for? (please express your answer using 2 decimal places)

Explanation / Answer

What is the expected value of he number of yen that $1 will exchange for?

0.24 * 85 + 0.23 * 90 + 0.35 * 95   + 0.18 * 100

92.35

expected vakue is 92.35 yen

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