An investment counselor calls with hot stock tip He bileves

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.

Solution

Consider the table:

Thus, as

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

then

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