An analyst estimates that the year-end price of a stock has the following probabilities: The stock's expected price at the end of the year is ________.
A) $87.50
B) $88.50
C) $89.00
D) $90.00

Question

An analyst estimates that the year-end price of a stock has the following probabilities:  The stock's expected price at the end of the year is ________.
A) $87.50 
B) $88.50 
C) $89.00 
D) $90.00

Quizplus · Accepted Answer

To find the expected price, we need to multiply each price by its corresponding probability and then sum up the results. 
Expected price = (0.1 x $80) + (0.3 x $85) + (0.4 x $90) + (0.2 x $95) = $8 + $25.50 + $36 + $19 = $88.50. Therefore, the expected price at the end of the year is $88.50.

An Analyst Estimates That the Year-End Price of a Stock