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Question

A private investigator found out that he only have one in seven chance in recovering stolen property. His out-of-pockets expenses for the investigation are 7000 pesos. He will only be paid if he recovers the stolen property. How much must he charge his clients to breakeven.

 

Please find the answer, mean, standard deviation and variance. Thank you 

Answer 1

Do the Expected Value calculation.

 

(1/7)(Fee if property is recovered-7,000) + (6/7)(-7,000 pesos) > 0.

 

Solve this for Fee (answer will be the breakeven value)...but of course he ought to charge considerably more in order to make a profit.