An investment counselor calls with hot stock tip. He bileves that if the economy

Question

An investment counselor calls with hot stock tip. He bileves that if the economy remains strong the investment will result in a profit of $50,000.If the economy grows at a moderate pace the investment will result in a profit of $10,000. However if the economy goes into recession the investmentt will result in a loss of $50,000. You contact an economist who believes there is a 20% proba bility 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.

Explanation / Answer

Consider the table:

Thus, as

E(x) = Sum(x P(x)) ,

then

E(x) = $12,000 [ANSWER]

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