Louis has invested $1 000 in the stock market.At the end of 1 year,there is a 30% chance that his stock will be worth only $800 and a 70% chance that it will be worth $1 200.The expected value of his stock at the end of 1 year is:
A) $1 000.
B) $1 080.
C) $1 200.
D) $1 160.

Question

Quizplus · Accepted Answer

The expected value is calculated by multiplying each outcome by its probability and summing the results: (0.3 * $800) + (0.7 * $1,200) = $240 + $840 = $1,080.

Louis Has Invested $1 000 in the Stock Market