Question

An investor has a 25% chance of making $1000 if the stock market is good, and a 50% chance of making $600 if the market is average. The investor expects to lose $800 if the market is bad. The expected monetary value is:

Answer 1

Answer: $350

Step-by-step explanation:

The expected monetary value is the weighted average of the outcomes.

25% - Stock Market is good

50% - Stock Market is average

25% - Stock market is bad

Expected Monetary Value = ( 0.25 * 1,000) + (0.5* 600) + ( 0.25 * -800)

= 250 + 300 - 200

= $350