Statistics help please

Discussion in 'General Discussions' started by statter, Apr 2, 2009.

  1. statter

    statter Level II

    Joined:
    Jan 9, 2009
    Messages:
    308
    Likes Received:
    4
    If an investor invest $100,000 what would be the expected return for Option A
    Option A: 15% return with probability 0.5
    no return with probability 0.1
    5% loss with probability 0.4

    Please help, this is a bit desperate :p I have an answer, but not sure if it is right as it is way too low :S
    Thanks for the people who help, will rep ++
     
    #1 statter, Apr 2, 2009
  2. lazypando

    lazypando Level IV

    Joined:
    Nov 16, 2006
    Messages:
    3,326
    Likes Received:
    94
    ($15,000)(.5) + ($0)(.1) + (-$5,000)(.4) = $5500

    So your expected return would be a profit of $5500.
     
    #2 lazypando, Apr 2, 2009
    statter and Heya_old like this.