You have just received your Masters degree and have begun in

You have just received your Master’s degree and have begun interviewing for a job in your field. You have narrowed it down to three companies that you would consider working for... Company A, Company B, and Company C. Part of your annual salary at each of the three companies depends on how well the company does at the end of each year. You are trying to decide on which company to work for [assuming all other factors (base salary, insurance, vacation, retirement benefits, etc.) are considered equal among these three companies]. Based on the data below, which company do you expect to earn the highest salary: [NOTE: You must show all of your work and explain how you arrived at your answer.] Company A Good Year (34% chance) ==> earn a bonus of $10,000 Bad Year (34% chance) ==> Jelly of the month club (i.e. no bonus)--\'the gift that keeps on giving\' Great Year (32% chance) ==> earn a bonus of $20,000 Company B Good Year (35% chance) ==> earn a bonus of $15,000 Bad Year (39% chance) ==> $5,000 is deducted from your \"base salary\" Great Year (26% chance) ==> earn a bonus of $22,000 Company C Good Year (63% chance) ==> earn a bonus of $7,000 Bad Year (22% chance) ==> no bonus Great Year (15% chance) ==> earn a bonus of $14,000

Solution

Company A details

Chance Bonus($)   

Good Year            0.34            10,000

Bad Year              0.34                 0

Great Year            0.32             20,000

Expected Salary of company A is 0.34*10,000   + 0.34*0 + 0.32*20,000 = $9,800

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Company B details

Chance Bonus($)   

Good Year            0.35            15,000

Bad Year              0.39              -5,000

Great Year            0.26             22,000

Expected Salary of company B is 0.35*15,000   + 0.39*-5,000 + 0.26*22,000 = $9,020

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Company C details

Chance Bonus($)   

Good Year            0.63              7,000

Bad Year              0.22                  0

Great Year            0.15             14,000

Expected Salary of company C is 0.63*7,000   + 0.22*0 + 0.15*14,000 = $6,510

Now, Compare all the companies the Company A gives highest salary.

So Companay A is better than the remaining Companies.