Question
An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of
An investment counselor calls with a hot stock tip. He believes that if the economy remains strong, the investment will result in a profit of $30 comma 000
30,000. If the economy grows at a moderate pace, the investment will result in a profit of $10 comma 000
10,000. However, if the economy goes into recession, the investment will result in a loss of $30 comma 000
30,000. You contact an economist who believes there is a 30
30% probability the economy will remain strong, a 60
60% probability the economy will grow at a moderate pace, and a 10
10% probability the economy will slip into recession. What is the expected profit from this investment?
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