An investor has a 35% chance of making $1000 and a 65% chance of making $10 000, what is the expected payoff for this investor?
A) $11 000
B) $6 850
C) $7 500
D) $10 000

Question

Quizplus · Accepted Answer

To calculate the expected payoff, we take the weighted average of the possible payouts: 
Expected Payoff = (0.35 x $1000) + (0.65 x $10,000) 
Expected Payoff = $350 + $6,500 
Expected Payoff = $6,850
Therefore, the correct choice is B.

An Investor Has a 35% Chance of Making $1000 and a 65