Answer: expected profit = 18,000 dollars
Step-by-step explanation:
expected value formulae = x * p(x)
x= data value, p(x) = probability of data value
When the economy is strong
profit to be made = 60,000 dollars
probability that economy will be strong = 30/100 = 0.3
expected value = profit * probability at which profit is made
expected value = 0.3 * 60000
expected value = 18,000 dollars
When economy grows at moderate pace
profit to be made = 10,000
probability that economy will be moderate = 60/100 = 0.6
expected value = 0.6 * 10000
expected value = 6,000 dollars
When economy is in recession
loss to be made = -60,000
probability that economy will be in recession = 10/100=0.1
expected value = 0.1 * -60000 = -6000 dollars
negative sign denotes loss.
total investment = 18,000 + 6000 - 6000
total investment = 18,000 dollars
