Scenario 5.4:
Suppose an individual is considering an investment in which there are exactly three possible outcomes, whose probabilities and payoffs are given below:
The expected value of the investment is $25. Although all the information is correct, information is missing.
-Refer to Scenario 5.4. What is the probability of outcome B?
A) 0
B) -0.5
C) 0.5
D) 0.4
E) 0.2

Question

Scenario 5.4:
Suppose an individual is considering an investment in which there are exactly three possible outcomes, whose probabilities and payoffs are given below:
  The expected value of the investment is $25. Although all the information is correct, information is missing.
-Refer to Scenario 5.4. What is the probability of outcome B?
A) 0 
B) -0.5 
C) 0.5 
D) 0.4 
E) 0.2

Quizplus · Accepted Answer

Probabilities must be between 0 and 1, and 0.5 is a valid probability value.

Scenario 5.4: Suppose an Individual Is Considering an Investment in Which There