What is the expected payoff of an investment that yields $1,000,000 with a probability of 0.001 and $0 with a probability of 0.999?

Name: What is the expected payoff of an investment that yields $1,000,000 with a probability of 0.001 and $0 with a probability of 0.999?
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Quizplus · Accepted Answer

The expected payoff is calculated by multiplying each outcome by its probability and summing these products. Thus, (0.001 * $1,000,000) + (0.999 * $0) = $1,000.

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