Case 1 A company has four legal claims outstanding, each for $109,000. There is a 10% chance that one claim will be paid out, a 10% chance that two will be paid out, a 5% chance for three, and a 5% chance for four payouts. 

Case 2 A company has four legal claims outstanding, each for $114,000. There is a 10% chance that one claim will be paid out, a 60 % chance that two will be paid out, a 5% chance for three, and a 15% chance for four payouts. 

Case 3 A company has four legal claims outstanding, each for $114,000. There is a 30% chance that one claim will be paid out, a 20% chance that two will be paid out, a 20% chance for three, and a 20% chance for four payouts. 

Required: 

For each case, decide if some payout is likely or not likely and calculate the expected value.

Answer rating: 100% (QA)

Ans Case I 10 x 114000 10 x 114000 x 2 5 x 114000 x 3 5 x 114000 ... View the full answer