SOLUTION: 4. Claire is considering investing in a new business. In the first year, there is a probability of 0.2 that the new business will lose $10,000, a probability of 0.4 that the new bu

Algebra ->  Finance -> SOLUTION: 4. Claire is considering investing in a new business. In the first year, there is a probability of 0.2 that the new business will lose $10,000, a probability of 0.4 that the new bu      Log On


   

Question 1105891: 4. Claire is considering investing in a new business. In the first year, there is a probability of 0.2 that the new business will lose $10,000, a probability of 0.4 that the new business will break even ($0 loss or gain), a probability of 0.3 that the new business will make $5,000 in profits, and a probability of 0.1 that the new business will make $8,000 in profits.

Answer by Boreal(15235) About Me  (Show Source):
You can put this solution on YOUR website!
Not clear what asked for but maybe Expected Value E(x)=sum x*p(x)
This is
MINUS 0.2*10000=-$2000
0.4*0=0
0.3*5000=$1500
0.1*8000=$800
E(x)=$2300-$2000=+$300.
This would make it reasonable to invest.