If there is a 70% chance that the economy will grow and a 30% chance that it will not, then an investor might expect to make $90 on an investment or $25 on that same investment, respectively for the state of the economy.In this situation, their expected return would be $70.50.

Question

Quizplus · Accepted Answer

To calculate the expected return, we multiply the probability of each outcome by the potential return from that outcome and then add them up. So, the expected return would be:
(0.7 x $90) + (0.3 x $25) = $63 + $7.50 = $70.50. Therefore, the statement is true.

If There Is a 70% Chance That the Economy Will