Question

An investment has the potential of earning you $5000 at a 20 percent probability $3000 at a 50 percent probability, and $2000 at a 30 percent probability, based on the performance of the stock market. The expected value of the investment is:__________. $(round your answer to the nearest penny)

Answer 1

The expected value of the investment is $3,100

Step-by-step explanation:

In order to calculate the expected value of the investment we would have to make the following calculation:

The expected value is the summation of the (event * probability of happening that event).

Therefore, The expected value of the investment = ($5,000*0.20) + ($3,000* 0.50) + ($,2000* 0.30)

The expected value of the investment = $1,000 + $1,500 + 600

The expected value of the investment= $3,100

The expected value of the investment is $3,100