You Are Experimenting with a Process for Producing High-Energy-Density Batteries

Multiple Choice

You are experimenting with a process for producing high-energy-density batteries. You have a contract with the government to deliver a batch of 20 batteries, due today. If you deliver them on time and they are all functional, you will get $100 000. Each battery has a 1% chance of being defective, and if any of them are defective, the government will not pay you the $100 000, but will fine you $10 000. What is the expected value to you of your contract with the government?

A) -$1 821
B) $79 970
C) $81 791
D) $82 645
E) $86 777