Problem 14SE

The article “Traps in Mineral Valuations—Proceed With Care” (W. Lonegan, Journal of the Australasian Institute of Mining and Metallurgy, 2001:18-22) models the value (in millions of dollars) of a mineral deposit yet to be mined as a random variable X with probability mass function p(x) given by p(10) = 0.40, p(60) = 0.50, p(80) = 0.10, and p(x) = 0 for values of x other than 10, 60, or 80.

a. Is this article treating the value of a mineral deposit as a discrete or a continuous random variable?

b. Compute μX.

c. Compute σX.

d. The project will be profitable if the value is more than $50 million. What is the probability that the project is profitable?

Solution 14SE

Step1 of 3:

We have models the value of a mineral deposit yet to be mined as a random variable X with probability mass function p(x) given by

P(10) = 0.40,

P(60) = 0.50,

P(80) = 0.10 and

P(x) = 0 for values of x other than 10, 60, or 80.

We need to find,

a).Is this article treating the value of a mineral deposit as a discrete or a continuous random variable?

b).Compute.

c).Compute .

d).The project will be profitable if the value is more than $50 million. What is the probability that the project is profitable?