What is expected value of investment

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1. Organizers of an outdoor summer concert in Toronto are concerned about the weather conditions on the day of the concert. They will make a profit of $23,000 on a clear day and $15,000 on a cloudy day. They will take a loss of $5000 if it rains. The weather channel has predicted a 57% chance of the rain on the day of the concert. Calculate the expected profit from the concert if the likelihood is 11% that will be sunny and 32% that it will be cloudy

2. An investor is considers investing $12000 in the stock market. He believes that the probability is 0.23 economy will improve, 0.41 that it will stay the same, and 0.36 that it will deteriorate. Further, if the economy improves, he expects his investment to grow to $21,000, but it can also go down to 9000 if the economy deteriorates. If the economy stays the same, his investment will stay at $12,000. What is expected value of his investment?

Reference no: EM132651656

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