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What is the expected value of dividend

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Reference no: EM132905511

Problem 1: A certain company pays dividends based on the overall state of the economy. You think that the economy has three possible states: boom, level, and slump. If the economy is booming, you will receive a $10 dividend. A normal economy will result in a $5 dividend, and a slumping economy will only pay a $2 dividend. Assuming that each state of the economy has a one in three chance of occurring, what is the expected value of your dividend?

Select one:

A. $5.67
B. $3.30
C. $15.00
D. $17.00

Reference no: EM132905511

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