The expected value of an investment:
A)Is what the owner will receive when the investment is sold
B)Is the sum of the payoffs
C)Is the probability-weighted sum of the possible outcomes
D)Cannot be determined in advance

Question

Quizplus · Accepted Answer

The expected value of an investment is the probability-weighted sum of the possible outcomes. It is calculated by multiplying the probability of each outcome by its respective payoff, and then summing these values. This provides a measure of the central tendency of the possible outcomes and can help investors make informed decisions. It is not necessarily the amount an owner will receive when the investment is sold, as this will depend on market conditions at the time of sale.

The Expected Value of an Investment