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 $30,000. If the economy grows at a moderate​ pace, the investment will result in a profit of $20,000.

​However, if the economy goes into​ recession, the investment will result in a loss of ​$30,000. 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?

Answer 1