there is a 40% chance that you will lose $25,000 if you invest in a company, but there is a 25% chance that you will break even
and a 35% chance that you make $40,000. what is the excepted value of the investment?
1 answer:
Answer:
4000
Step-by-step explanation:
Remark
The expected value is found by multiplying the value by it's probability. For the first one 40% * (- 25000) = - 10000
Breaking even means that you neither add nor subtract a given amount
25% * 0 = 0
35% * 40000 = 14000
So the expected value = - 10000 + 14000 = 4000
Summary
- Loss: - 10000
- Break Even: 0
- <u>Win: 14000</u>
- Expected value 4000
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