Answer:
loss of $200
Explanation:
As given, there are three cases can happen:
1) 0.20 probability that the stock will show a $3000 profit
=> 0.20 probability that profit = $3,000
2) 0.10 probability that the stock will show a $6000 profit
=> 0.10 probability that profit = $6,000
3) 0.70 probability that the stock will show a $2000 loss
=> 0.70 probability that profit = - $2,000
The expected profit in the stock at the end of the year can be calculated as following:
Expected profit = Probability case 1 x Profit case 1 + Probability case 2 x Profit case 2 + Probability case 3 x Profit case 3
=0.2 x 3,000 + 0.1 x 6,000 + 0.7 x (-2,000)
=. 600 + 600 -1,400 = -200
So that, the expected profit in the stock is the loss of $200
