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A stockbroker estimates that at the end of the year, there is a 40% chance a stock will be worth $50,
a 35% chance it will be worth $60 and a 25% chance it will be worth $70. What expected value
does this broker assign to this stock's end-of-the-year price?

Respuesta :

abiolataiwo2015

The expected value  that  this broker assign to this stock's end-of-the-year price is $58.50.

Using this formula

Expected value=Stock worth at $50+ Stock worth at $60+ Stock worth at $70

Where:

Stock worth at $50=40% chance

Stock worth at $60=35% chance

Stock worth at $70=25% chance

Let plug in the formula

Expected value=(40%×$50)+($35%×$60)+($25%×$70)

Expected value=$20+$21+$17.5

Expected value=$58.50

Inconclusion the expected value  that  this broker assign to this stock's end-of-the-year price is $58.50.

Learn more here:

https://brainly.com/question/12834805

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