SOLUTION: An investment opportunity has 15% chance of making $2500, a 34% chance of making $1300, a 11% chance of breaking even. and a 40% chance of loosing $1600. What is the expected value

Algebra ->  Probability-and-statistics -> SOLUTION: An investment opportunity has 15% chance of making $2500, a 34% chance of making $1300, a 11% chance of breaking even. and a 40% chance of loosing $1600. What is the expected value      Log On


   

Question 1180666: An investment opportunity has 15% chance of making $2500, a 34% chance of making $1300, a 11% chance of breaking even. and a 40% chance of loosing $1600. What is the expected value for the investment?
Found 2 solutions by greenestamps, ikleyn:
Answer by greenestamps(13198) About Me  (Show Source):
You can put this solution on YOUR website!


Straightforward application of the definition of expected value:

.15%28%2B2500%29%2B.34%28%2B1300%29%2B.11%280%29%2B.40%28-1600%29

Use a calculator if needed....

Answer by ikleyn(52776) About Me  (Show Source):
You can put this solution on YOUR website!
.

It is 0.15*2500 + 0.34*1300 + 0.11*0 - 0.40*1600 = 177  dollars.    ANSWER

Solved.

The formula is self-explanatory.

The factor   " 0 "   in the formula represents the zero amount, which corresponds to break event.