Question

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 $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 investment will result in a loss of $50,000. 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?
Compute and interpret the expected profit for reselling the property.


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  • CreatedApril 27, 2015
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