You have an investment opportunity with the following state-contingent payoffs:
-Refer to the information above. What is the expected value of this investment?
A)$49,500
B)$49,333
C)$53,500
D)$56,000

Question

You have an investment opportunity with the following state-contingent payoffs: 
-Refer to the information above. What is the expected value of this investment?
A)$49,500 
B)$49,333 
C)$53,500 
D)$56,000

Quizplus · Accepted Answer

The expected value is the sum of the products of the possible outcomes and their probabilities. In this case, the possible outcomes are $49,000, $50,000, and $51,000, and the probabilities are 1/3, 1/3, and 1/3, respectively. Therefore, the expected value is (1/3) * $49,000 + (1/3) * $50,000 + (1/3) * $51,000 = $49,500.

You Have an Investment Opportunity with the Following State-Contingent Payoffs