If there is a 60% chance that the economy will grow and a 40% chance that it will not, then an investor might expect to make $75 on an investment or -$10 on that same investment, respectively for the state of the economy.In this situation, their expected return would be $49.

Question

Quizplus · Accepted Answer

The expected return is calculated by multiplying each outcome by its probability and summing these products. So, it would be (0.60 * $75) + (0.40 * -$10) = $45 + (-$4) = $41.

If There Is a 60% Chance That the Economy Will