Question

What is the probability of a stock making money in the next year?

1) 45%
2) 55%
3) 65%
4) 75%

Answer 1

The probability of a stock making money in the next year can be calculated based on the given information. The expected profit after one year is $150.

Step-by-step explanation:

The probability of a stock making money in the next year can be calculated based on the given information.

According to the information, the probability of losing all the money after one year is 35%, the probability of no profit and no loss is 60%, and the probability of gaining $10,000 is 5%.

To find the expected profit after one year, we multiply each outcome by its corresponding probability and sum them up:

Expected Profit = (Probability of losing all money * Loss amount) + (Probability of no profit and no loss * No profit and no loss amount) + (Probability of gaining $10,000 * Gain amount)

Expected Profit = (0.35 * -$1,000) + (0.60 * $0) + (0.05 * $10,000)

Expected Profit = -$350 + $0 + $500

Expected Profit = $150