Ron s checkbook shows a balance of $400. a recent statement from the bank (received last week) shows that all checks written as of the Statement date have been paid except numbers 325 and 326, which were for $35and $58 respectively. Since the statement date, checks 327, 328, and 329 have been written for $22, $45, and $17, respectively There is an 80 percent probability that checks 325 and 326 have been paid by this time. There is a 50 percent probability that checks 327, 328, and 329 have been paid a. What is the total value of the five checks outstand ing? b. What is the expected value of payments for the five checks outstand ing? c. What is the difference between parts a and b? This represents a type of fld Solution: Ron's checkbook a.$35+$58+$22+45+17=$177 b Probability check Expected Amount has cleared value $35 80% $2800 $58 xxx 80% 46.40 $22 0% 1100 $45 50% 22.50 $17 50% 8.50 S116.40 expected value of payment or five checks outstanding c.(a-b)=$177.00-$11640=s6060foat Copyright C2005 by The McGra-Hill Companies, Inc.Copyright © 2005 by The McGraw-Hill Companies, Inc. S-245 7-2. Ron's checkbook shows a balance of $400. A recent statement from the bank (received last week) shows that all checks written as of the Statement date have been paid except numbers 325 and 326, which were for $35and $58, respectively. Since the statement date, checks 327, 328, and 329 have been written for $22, $45, and $17, respectively. There is an 80 percent probability that checks 325 and 326 have been paid by this time. There is a 50 percent probability that checks 327, 328, and 329 have been paid. a. What is the total value of the five checks outstanding? b. What is the expected value of payments for the five checks outstanding? c. What is the difference between parts a and b? This represents a type of float. Solution: Ron's Checkbook a. $35 + $58 + $22 +45 +17 = $177 b. Amount Probability check has cleared Expected value $35 x 80% $ 28.00 $58 x 80% 46.40 $22 x 50% 11.00 $45 x 50% 22.50 $17 x 50% 8.50 $116.40 expected value of payment for five checks outstanding c. (a – b) = $177.00 – $116.40 = $60.60 float