1. ## Binomial Random Variable

A newsboy purchases papers at 10 cents and sells them at 15 cents. However, he is not allowed to return unsold papers. If his daily demand is a binomial random variable with n=10, p=1/3, approximately how many papers should he purchase so as to maximize his expected profit?

I'm not really sure how to approach this problem. More specifically, how does the "buy at 10 cents sell at 15 cents" fit into the problem? How does that fit into my binomial equation?

Thank you

2. Originally Posted by crabchef
I'm not really sure how to approach this problem. More specifically, how does the "buy at 10 cents sell at 15 cents" fit into the problem? How does that fit into my binomial equation?
Thank you
It doesn't. You need to consider this afterwards.

For a binomial dist with $\displaystyle n=10$ and $\displaystyle p =\frac{1}{3}$ how many papers would he expect to sell?

3. Since it's a binomial, I'm guessing we're using the equation:

$\displaystyle \binom {10} {i} (1/3)^{10}(2/3)^{10-i}$ but I don't know what to plug in for i =(

4. Originally Posted by crabchef
Since it's a binomial, I'm guessing we're using the equation:

$\displaystyle \binom {10} {i} (1/3)^{10}(2/3)^{10-i}$ but I don't know what to plug in for i =(
Ah, you're getting things mixed up, that would be the probability of getting exactly i successes in 10 trials.

What is the expected value for binomial distribution?