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Answer (B) is correct . The expected value of the land is determined by multiplying the probability of each state of nature by the value under that particular state of nature and adding all of the products. Thus, the land’s expected value is $195,000 [(0.5)($200,000) + (0.4)($100,000) + (0.1)($550,000)].

Answer (A) is incorrect because The amount of $133,333 places too much weighting on the second option.
Answer (C) is incorrect because The amount of $225,000 gives too much weight to the third option.
Answer (D) is incorrect because The amount of $283,333 uses a simple unweighted average of the returns from the three options.