A graduate wants to pursue a career in a profession She will

A graduate wants to pursue a career in a profession. She will need to gain membership of the professional institute by passing three stages of examinations. If she becomes a full member of the institute she anticipates that she will be able to earn 50,000per year. If she fails the final stage of the examinations, but passes the first two stages she can become and associate member of the institute. An associate member ears about 32,000 per year. If she fails at the second stage of the evaluation but passes the initial stage she can obtain a certificate of competence from the institute and probably ear 24,000, If she fails the initial stage of the examinations she will have to consider other employment and anticipates that she would be able to earn 18,000. The pass rates for the initial, second, and final stages of the institute’s examinations are 710%, 55% and 80% respectively. What is the expected value of her annual earnings?

Solution

Expected value

7.1*(50,000 + 32,000 + 24,000) + 0.55*(50,000 + 32,000 + 18,000) + 0.80*(50,000+24,000+18,000)

752600 + 55000 + 73600

881200

Expected value = $881,200