Exercise 4 Suppose an investor is concerned about a business choice in which there are three prospects; the probability and returns are given below: Probability Return 0

Economics Aug 13, 2020

Exercise 4 Suppose an investor is concerned about a business choice in which there are three prospects; the probability and returns are given below: Probability Return 0.3 $130 0.4 40 0.3 -30 The expected value of the uncertain investment is $ (Round your answer to the nearest dollar)

Expert Solution

Expected value of the uncertain investment = 0.3 × $130 + 0.4 × $40 - 0.3 × $30 = 39 + 10 + 10 = $59

The expected value of the uncertain investment is $59.00.

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