An investor is considering an investment in a startup compan

An investor is considering an investment in a start-up company. She estimates that she has probability 0.25 of a $ 39,739 loss, probability 0.20 of a $ 19,759 profit, probability 0.15 of a $ 49,068 profit, and probability 0.40 of breaking even (a profit of $0). What is the expected value of the profit?

Write only a number as your answer. Round to the nearest whole number.

Solution

p

value

profit/loss = p*value

0.25

-39739

-9934.75

0.2

19759

3951.8

0.15

49068

7360.2

0.4

0

0

Total

1377.25

expected value of the profit =1377.25

expected value of the profit = $ 1377    ( in whole number)