An investor plans to put $50,000 in one of four investments. The return on each

Question

An investor plans to put $50,000 in one of four investments. The return on each investment depends on whether next year's economy is strong or weak. The following table summarizes the possible payoffs, in dollars, for the four investments: The probability that the economy will be strong is 40% ands weak is 60% Which of the Tables is correct when it comes to Expected Value Table of the investment Pinworm infestation, commonly found in children, can be treated with the drug that is effective in 74% cases. Suppose that three children with pinworm infestation are given the drug.

Explanation / Answer

E(x) =Sum ( Probability * Value)

a) Certificate of deposit, E(x) = 5000*0.6+5000*0.4=5000

Office complex, E(x) = 14000*0.4+5500*0.6=8900

Land speculation, E(x) = 32000*0.4-0.6* 16500 = 2900

Technical school, E(x) = 6000*0.4+11500*0.6 = 9300

Hence, the correct answer is table C.

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