Andreas has invested $1,000 in the bond market. At the end of one year, there is a 30% chance that his asset will be worth only $800 and a 70% chance that it will be worth $1,200. The expected value of his asset at the end of one year is:

Question

Quizplus · Accepted Answer

The expected value is calculated as the sum of each possible value times its probability of occurrence: (0.30 * $800) + (0.70 * $1,200) = $240 + $840 = $1,080.

Andreas Has Invested $1,000 in the Bond Market