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Calculating mean and standard deviation in the given case

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You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted into medical school is about 10 percent. If you are accepted into medical school, then your starting salary when you graduate will be $300,000 per year. However, if you are not accepted, then you would choose to work in a zoo, where you will earn $40,000 per year. Without considering the additional educational years or the time value of money, what is your expected starting salary as well as the standard deviation of that starting?

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Solution Preview

Please refer attached file for better clarity of tables and missing formulas.

Probability of being accepted into medical school=10%=0.10
Probability of not being accepted into medical school=1-0.10=0.90
Expected salary in case he graduates as doctor=$300,000 ...

Solution Summary

Solution describes the steps to calculate expected salary and standard deviation of starting salary in the given case.

$2.19