Refer to problem 3-7. Suppose that hedge funds must withhold $300 million from the income of the

Question:

Refer to problem 3-7. Suppose that hedge funds must withhold $300 million from the income of the manager and an additional 5% of the remaining income. Find the expected net income of a manager in this group. What property of expected values are you using?

x ($ millions)P(x)

$1,700 ...... 0.2

1,500 ...... 0.2

1,200 ...... 0.3

1,000 ...... 0.1

800 ...... 0.1

600 ......0.05

400 ......0.05