Solution-How much would you expect to win by playing a game

How much would you expect to win by playing a game

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Q1. How much, on average, do you expect to gain by investing $4,120 in the following stock?

To buy the stock, you have to pay a $120 nonrefundable service charge. There is a 50% chance that the firm will be bought by a large computer firm next year. If that is the case, there is a 40% chance that the stockholders will be bought out at double the present stock price and a 60% chance that the stockholders will be bought out at 150% of the present stock price. If the firm is not bought by the large company, there is a 50% chance that the firm's stock value will stay the same and a 50% chance that the firm will go broke. If the firm goes broke, its stock will be totally worthless.

2. On the average, how much would you expect to win by playing a game with a 50% chance to win $4,000, a 30% chance to lose $1,000, and a 20% chance to lose $2,000?

Reference no: EM132908382

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How much would you expect to win by playing a game

Reference no: EM132908382

Reference no: EM132908382

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