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Thread: Praxis II question

  1. #1
    Feb 2009
    chattanooga tn

    Praxis 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
    Last edited by tigerpaw; Feb 16th 2009 at 03:41 PM.
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  2. #2
    MHF Contributor matheagle's Avatar
    Feb 2009
    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.
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