n Score: 0 of 1 pt 12 of 13 (11 complete) HW Score: 69.82%, 9.08 of 13 pts 6.1.2

Question

n Score: 0 of 1 pt 12 of 13 (11 complete) HW Score: 69.82%, 9.08 of 13 pts 6.1.28 Question Help An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $60,000. If the economy grows at a moderate pace, the investment will resultin a profit of $20,000. However, if the economy goes into recession, the investment will result in a loss of $60,000. You contact an econom st who believes there is a 20% probability the economy wil remain strong, a 60% probability the economy will grow at a moderate pace, and a 20% probability the economy will slip into recession What is the expected profit from this investment? The expected profit is sType an integer or a decimal) The expected profit is $((Type an nteger or a decma)

Explanation / Answer

The table below shows the profit and probability data

Expected Value = Sum[x*P(x)] = 60000*0.2 + 20000*0.6 - 60000*0.2 = $120,000

x 60,000 20,000 -60,000 P(x) 0.2 0.6 0.2

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