Question

Yun is making some investments in the stock market. Stock for Company A has a 30% chance of losing $12,000, a 45% chance of breaking even, and a 25% chance of earning Yun $11,000. Assuming Yun would like the odds to be in favor of her gaining money, should she invest in Company A? Explain.

a. no, 7,700 > 3,600
b. yes, 7,700 > 3,600
c. yes, 3,600 > 2,750
d. no, 3,600 > 2,750

Answer 1

D. no, 3,600 > 2,750.

Answer 2

We have been given that company A has a 30% chance of losing $12,000.

Let us calculate the amount that Yun can loose.

`(12000* 30)/(100) \\ \\ =\$3600`

Now, 45% chance of breaking even. It means neither loss nor profit.

Then, 25% chance of earning Yun $11,000.

Let us calculate the amount of profit

`(11000 * 25)/(100) \\ \\ =\$2750`

Since, 3,600 > 2,750. It means that Yun will be in loss on investing in the company.

Hence, she will not invest in the company A.

d is the correct option.

d. no, 3,600 > 2,750