Suppose You Have $200 with Which You Can Buy Shares

question 94

Multiple Choice

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade.Each company's stock currently sells for $100 per share.If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change.If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change.There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average.If you purchase two shares of XYZ stock and no shares of ABC stock, your expected gain will be ______.

• A)$0
• B)$10
• C)$20
• D)$30

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