Calculate the Expected Value of an Investment That Has the Following

question 91

Essay

Calculate the expected value of an investment that has the following payoff frequency: a quarter of the time it will pay $2,000, half of the time it will pay $1,000 and the remaining time it will pay $0.

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Definitions:

Independent Variable

In experiments, a variable that is manipulated to determine its effect on a dependent variable, independent of other variables.

Dependent Variable

A variable in an experiment or study whose changes depend on the manipulation of one or more independent variables.

Consumption

The use of goods and services by households, representing the end phase of the economic process as goods are utilized to fulfill needs or wants.

Income

Money received, especially on a regular basis, for work or through investments.