You have the opportunity of making a $5,000 investment. The outcomes one year from now will be either $4,500 or $6,000, with an equal chance of either outcome occurring. What is the expected outcome?

Question

Quizplus · Accepted Answer

To find the expected outcome, we calculate the weighted average of the two outcomes: 
Expected outcome = (0.5 x $4,500) + (0.5 x $6,000) = $5,250. Therefore, the best choice is to invest since the expected outcome is greater than the initial investment.

You Have the Opportunity of Making a $5,000 Investment