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December 7, 2016

Homework Help: Probabilities

Posted by Andrey L on Friday, May 1, 2009 at 10:36pm.

An investor has $20,000 to invest in stocks. She can buy blue chip or specu-
lative stocks. If the market goes up the blue chips will pay o® $30,000 and speculative will
pay o® $50,000. If the market goes down, the blue chips will pay o® $10,000 and speculative
will pay o® $1,000. If the probability of the market going up is :4, then the expected pro¯t
for the best strategy is closest to?

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