Calculate the expected value of each investment/ Managerial Economics
Question:
An investor has two investment opportunities, each involving an outlay of $10,000. The present value of possible outcomes and their respective probabilities are:
Investment I Investment II
Outcome $4,000 $6,000 $3,000 $5,000 $7,000
Probability 0.6 0.4 0.4 0.3 0.3
A. Calculate the expected value of each investment.
b. Draw a bar chart for each investment.
c. Calculate the standard deviation of each project.
d. Determine which of the two investments the investor should choose.
