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15 March, 15:34

Type the correct answer in each box. Use numerals instead of words.

An Investment worth $50,000 has these expectations of returns:

• 3096 chance of ending up worth $40,000

• 50% chance of ending up worth $50,100

• 20% chance of ending up worth $65,000

Determine the expected value and risk.

. The investment is risky because it has only a

% chance of making a significant

The expected value of the investment is $

return.

+1
Answers (2)
  1. 15 March, 17:48
    0
    The investment is risky because it has only a

    2% chance of making a significant

    The expected value of the investment is $ 49,050

    return

    Explanation:

    Investment = $50,000

    Expected worth = (Chance in % x Expected Worth)

    30% x $40,000 = $12,000

    50% x $50,100 = $25,050

    20% x $60,000 = $12,000

    Total Expected Worth = $49,050

    Expected value is $49,050

    Chance to make the same worth is 2% ((50000-49050) / 50,000)
  2. 15 March, 18:03
    0
    The investment is risky because it has only a 1% chance of making a significant impact.

    The expected value of the investment is $50,050 return

    Explanation:

    The expected value of an investment is relevant returns multiplied by the probability of returns multiplied by the number of times such probability will occur

    30% chance would expected value as 30%*$40,000*1=$12000

    50% chance would have expected value as 50%*50,100*1=$25,050

    20% chance would have expected value as 20%*65,000*1=$13000

    Expected value in total $50,050

    The riskiness of the investment can be calculated as (expected value-initial investment) / initial investment

    initial investment is $50,000

    expected value is $50,050

    riskiness of investment = ($50,050-$50,000) / $50,000

    =1%
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