Expected Value Exercise 3
An investment opportunity has two possible outcomes.
The expected value of the investment opportunity is $250. One outcome yields a $100 payoff and has a
probability of 0.25.
What is the payoff
of the other outcome?
the payoff of the other outcome=
ReplyDelete250-(0.25x$100)=225
--> 225:0,75= 300
Known :
ReplyDeleteThe Expected Value of investment is $250
One probability of 0.25 (0.25 x 100% = 25%) has outcome yields $ 100
Solutions:
So the other probability = 100 % - 25 % = 75%
So the other outcome is :
Expected Value = ( First outcome known) (Probability of first outcome known) + (Unknown outcome) (Probability of unknown outcome)
$ 250 = ( $ 100 * 0.25 ) + ( x * 0.75 )
0.75 x = $ 250 - $ 25
0.75 x = $ 225
X = $ 225 / 0.75
X = $ 300
So the other probability is 0.75 with $ 300 possible outcome
EV = 250
ReplyDeleteProbability =1
First Outcome :
probability = 0.24, payoff = 100
EV of first outcome only = (0.25 x 100 ) = 25
Probability of 2nd outcome =? = 1-0.25 = 0.75
2nd Payoff : 250-25 = 225 (: 0.75) = $300
diketahui:
ReplyDeleteExpected value = $ 250
P =0,25
pay off = 100
E(v) = (p)(x)
= o,25 (100)
E(v)= 25
for other outcomes with has 1 outcome - 0,25 = 0,75. so the other outcome is
250-25 =225/0,75 = $ 300
ANSWER:
ReplyDelete100 x 0.25 + B x 0.75= 250
225 = 0.75 B
B = 300