Type the correct answer in each box. Use numerals instead of words.

An Investment worth $50,000 has these expectations of returns:

• 3096 chance of ending up worth $40,000

• 50% chance of ending up worth $50,100

• 20% chance of ending up worth $65,000

Determine the expected value and risk.

. The investment is risky because it has only a

% chance of making a significant

The expected value of the investment is $

return.

The investment is risky because it has only a 1% chance of making a significant impact.

The expected value of the investment is $50,050 return

Explanation:

The expected value of an investment is relevant returns multiplied by the probability of returns multiplied by the number of times such probability will occur

30% chance would expected value as 30%*$40,000*1=$12000

50% chance would have expected value as 50%*50,100*1=$25,050

20% chance would have expected value as 20%*65,000*1=$13000

Expected value in total $50,050

The riskiness of the investment can be calculated as (expected value-initial investment) / initial investment

initial investment is $50,000

expected value is $50,050

riskiness of investment = ($50,050-$50,000) / $50,000

=1%

The investment is risky because it has only a

2% chance of making a significant

The expected value of the investment is $ 49,050

return

Explanation:

Investment = $50,000

Expected worth = (Chance in % x Expected Worth)

30% x $40,000 = $12,000

50% x $50,100 = $25,050

20% x $60,000 = $12,000

Total Expected Worth = $49,050

Expected value is $49,050

Chance to make the same worth is 2% ((50000-49050) / 50,000)