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An Investor Is Considering a $20,000 Investment in a Start-Up

Question 3

Multiple Choice

An investor is considering a $20,000 investment in a start-up company. She estimates that she has probability 0.1 of a $15,000 loss, probability 0.05 of a $20,000 profit, probability 0.25 of a $35,000 profit, and probability 0.6 of breaking even (a profit of $0) . What is the expected value of the profit?


A) $11,250
B) $13,333
C) $8250
D) $20,250

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