An investor is considering an investment in a start-up company. she estimates that she has probability 0.25 of a $ 39,739 loss, probability 0.20 of a $ 19,759 profit, probability 0.15 of a $ 49,068 profit, and probability 0.40 of breaking even (a profit of $0). What is the expected value of the profit?
Write only a number as your answer. Round to the nearest whole number.
To calculate the expected value of the profit, we need to multiply each profit outcome by its corresponding probability and sum them up.
Expected value = (0.25 * (-$39,739)) + (0.20 * $19,759) + (0.15 * $49,068) + (0.40 * $0)
Expected value = -$9,935 + $3,952 + $7,360 + $0
Expected value = $1,377
Rounding to the nearest whole number, the expected value of the profit is $1,377.
To calculate the expected value of profit, we multiply each profit outcome by its corresponding probability and sum them up.
Given:
- Probability of a $39,739 loss: 0.25
- Probability of a $19,759 profit: 0.20
- Probability of a $49,068 profit: 0.15
- Probability of breaking even (profit of $0): 0.40
Expected profit = ($39,739 * 0.25) + ($19,759 * 0.20) + ($49,068 * 0.15) + ($0 * 0.40)
Simplifying the equation, we get:
Expected profit = $9,934.75 + $3,951.80 + $7,360.20 + $0
Expected profit = $21,246.75
Rounding this to the nearest whole number, the expected value of profit is $21,247.
EVprofit=.25(-39747)+.2(19759)+.15(59068)+.4(0)
Surely you can do this math.