Royalties received by an investor in an oil well vary according to the price of oil. Data collected from stripper wells in a West Texas oilfield were used to develop the royalty probability relationships shown.
(a) Is the variable discrete or continuous as shown?
(b) What is the expected value of royalty income, E(RI), per year
(c) What are the chances that royalty income will be at least $10,500 per year?
(d) Use a spreadsheet to plot the probability distribution of RI with the information shown.
 FIGURE 1.png)
(a) Discrete as shown
(b) E(RI) = 6000(0.10) + 8500(0.21) + 9500(0.32) + 10,500(0.24) + 12,500(0.09)
+ 15,500(0.04)
= $9690
(c) P(RI ?10,500) = P(RI = 10,500) + P(RI =15,500)
=0.24 + 0.09 + 0.04
= 0.37 (37%)
(d) Plot shown for observed values of Royalty Income, RI
 ANSWER.png)
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