This Quiz: 20 pts possible 0l201r Cripilete Question Help An investment counselo

Question

This Quiz: 20 pts possible 0l201r Cripilete Question Help An investment counselor cals with a hot slock tip. He believes that it the economy remains strong, the investment will result in a profit of $30,000. i# the aconomy grows at s moderste pace, the investment wil result in a profnt of $10,000. However, it the oconomy goes into recessian, the investment will resuft in a loss of S 30 000. You contact an economist who bete es there is a 20% probability the economy wil remain strong, a 70% probablity the economy will grow at a moderate pace, and a 10% probability the economy wil slip into recession, what is the expected profit from this investment? The expected profits $.(Type an integer or deamal.

Explanation / Answer

Expected profit is equals to mean

first write the probabilities of each outcome : P(strong)=20%, P(moderate)=70%, P(recession)=10%

Let x represent the profit result. If strong, x=30,000, if moderate x=10,000, if recession x=-30,000

So the calculation would be,

=(30000)*(20%)+(10000)*(70%)+(-30000)*(10%)

=10,000

So the expexted profit is $10,000

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