An investment opportunity has two possible outcomes. The expected value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the payoff of the other outcome?
A) -$400
B) $0
C) $150
D) $300
E) none of the above

Question

Quizplus · Accepted Answer

The expected value is calculated as (0.25 * $100) + (0.75 * X) = $250. Solving for X gives X = $300.

An Investment Opportunity Has Two Possible Outcomes