Theory question based on investment in stock

Reference no: EM1315713

Theory question based on investment in stock.

An investor wishes to buy a company's stock. Based on her market research, she has determined that there is a 0.6 probability of making a $20,000 profit, and a 0.4 probability of a $25,000 loss. She computes the expected value to be $2000. Assuming the value is correct; would you advise her to proceed with the investment?

In general, what does the expected value tell us about an event?

Can we conclude that if she repeats the same investment twice, the mean value of her net gain/loss will again be $2000?

What if she repeats the experiment 10 times?

Reference no: EM1315713

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