lUhework: Section 6.1 Score: 0 of 1 pt 6.1.28 Save 1.4.1.-80f11 (6 complete) ? H

Question

lUhework: Section 6.1 Score: 0 of 1 pt 6.1.28 Save 1.4.1.-80f11 (6 complete) ? HW Score: 53 41%,58 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 $40.000. if the economy grows at a moderate pace, the investment will result in a profit of $20,000 However. if the economy goes into recession, the investment will result in a loss of $40,000 You contact an economist who believes there is a 20% probability the economy will remain strong, a 70% probability the economy will grow at a moderate pace, and a 10% probability the economy will slip into recession. What is the expected profit from this investment? The expected profit is $ (Type an integer or a decimal) Enter your answer in the answer box and then dlick Check Answer All parts showing

Explanation / Answer

Let X is a random variable shows the profit. Here we have

P(X= 40000) = 0.20

P(X= 20000) = 0.70

P(X= -40000) = 0.10

So the expected profit is

E(X) = 40000 * P(X=40000) + 20000 * P(X=20000) + (-40000) * P(X= -40000) = 40000 *0.20 + 20000 * 0.70 - 40000 * 0.10 = 18000

Answer: $18,000

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