n investment counselor calls with a hot stock tip. He believes that if the economy rema esult in a profit of $60,000. If the economy grows at a moderate pace, the investment w However, if the economy goes into recession, the investment will result in a loss of $60, who believes there is a 20% probability the economy will remain strong, a 70% probabil noderate pace, and a 10% probability the economy will slip into recession. What is the vestment?

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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 $60,000. If the economy grows at a moderate pace, the investment will result in a profit of $10,000.
However, if the economy goes into recession, the investment will result in a loss of $60,000. 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?
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 $60,000. If the economy grows at a moderate pace, the investment will result in a profit of $10,000. However, if the economy goes into recession, the investment will result in a loss of $60,000. 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?
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