An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $30,000. If the economy grows at a moderate pace, the investment will result in a profit of $20,000. However, if the economy goes into recession, the investment will result in a loss of $30,000. You contact an economist who believes there is a 20% probability the economy will remain strong, a 70% probability the economy will grow at a moderate pace, and a 10% probability the economy will slip into recession. What is the expected profit from this investment? The expected profit is 9 (Type an integer or a decimal.)
An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $30,000. If the economy grows at a moderate pace, the investment will result in a profit of $20,000. However, if the economy goes into recession, the investment will result in a loss of $30,000. You contact an economist who believes there is a 20% probability the economy will remain strong, a 70% probability the economy will grow at a moderate pace, and a 10% probability the economy will slip into recession. What is the expected profit from this investment? The expected profit is 9 (Type an integer or a decimal.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An investment counselor calls with a hot stock tip. He believes that if the
economy remains strong, the investment will result in a profit of $30,000.
If the economy grows at a moderate pace, the investment will result in a
profit of $20,000. However, if the economy goes into recession, the
investment will result in a loss of $30,000. You contact an economist who
believes there is a 20% probability the economy will remain strong, a 70%
probability the economy will grow at a moderate pace, and a 10%
probability the economy will slip into recession. What is the expected
profit from this investment?
The expected profit is 9 (Type an integer or a decimal.)
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