By investing a person can make a profit of $3000 with a with a 3 percent probability or take a loss of $1000 with a 7 percent probability, what is the investors expected net gain for the year?

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- Feb 16th 2009, 04:26 PMtigerpawPraxis II question
By investing a person can make a profit of $3000 with a with a 3 percent probability or take a loss of $1000 with a 7 percent probability, what is the investors expected net gain for the year?

Need Help Please - Feb 16th 2009, 05:54 PMmatheagle
Do you mean .3 and .7?

Or .03 and .07?

In the second case you are implying that there is a .9 probability of making nothing.

In the first case, just multiply .3 with 3000

and add that to the product of .7 and -1000.

Which produces 9000-7000=2000.