(Solution Document) Please show your work in how you got the answer for the problem. A firm might be liable for $10 million if a lawsuit is brought against it.


Please show your work in how you got the answer for the problem.


A firm might be liable for $10 million if a lawsuit is brought against it. The firm judges

that the probability the suit will be brought is 0.6. In addition, it believes that its chance of winning

such a suit (in which case it owes $0) is 0.7. The firm's overall expected liability is:

a) $6 million.

b) $4.2 million.

c) $3 million.

d) $1.8 million.

e) $1.2 million.


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