Question

A stock has a 25% probability of increasing by $10 and a 75% probability of decreaing by $5. What is the stocks expected increase or decrease?

Please help me!!!!

Answer 1

Explanation:

The expected value is the sum of each probability times the value.

E = 0.25 (10) + 0.75 (-5)

E = -1.25

The stock is expected to decrease by $1.25.