Question

Calculate the expected gain or loss for Stock ABC. Lose $25 Gain $5 Gain $45 Stock ABC 40% | 15% | 45% Stock JKL| 15% | 65% | 20% Stock MNO| 5% | 80%| 15%

Answer 1

Answer:

$11

Step-by-step explanation:

$\left\begin{array}{c|ccc}& Lose \ 25& Gain \ 5& Gain \ 45\\ Stock ABC&40\%&15\%&45\%\end{array}\right$

We want to calculate the expected gain or loss of Stock ABC with the probabilities above.

Note that loss is written in negative.

$E xpected Value = (-25 \times 40\%)+(5 \times 15\%) + (45 \times 45\%)\\=(-25 \times 0.4)+(5 \times 0.15)+(45 \times 0.45)\\=-10+0.75+20.25\\=\ 11$

Stock ABC has an expected gain of $11.