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 $50 comma 000. if the economy grows at a moderate pace, the investment will result in a profit of $20 comma 000. however, if the economy goes into recession, the investment will result in a loss of $50 comma 000. you contact an economist who believes there is a 20% probability the economy will remain strong, a 60% probability the economy will grow at a moderate pace, and a 20% probability the economy will slip into recession. what is the expected profit from this investment?

The expected profit from this investment is $12000

Explanation:

The expected profit is that profit which is to be imagine in the future. With the help of probability, it is easy to compute the expected profit.

The formula to compute the expected profit is shown below:

= Strong Profit × Strong Probability + Moderate profit × moderate Probability - Recession Loss × recession probability

= $50,000 × 20% + $20,000 × 60% - $50,000 × 20%

= $10,000 + $12,000 - $10,000

= $12000

Thus, the expected profit from this investment is $12000.

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disadvantages of purchasing a vehicle: large down payment and vehicle depreciation

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