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A risky stock sells for $10 per share. With probability 0.3, the stock will be worth 3 times as much in two years. With probability 0.7, the stock will be worth 1/10 as much in two years. Suppose you buy 10 shares of the stock and then sell the stock in two years. Let N be the random variable denoting your net gain in dollars. What is the expected value of N

Respuesta :

The expected value of the net gain from selling the stock in 2 years is $-3.

What is the net gain?

The net gain is the total profit from selling the stock less the total cost of buying the stock

Total cost of buying the stock = 10 x $10 = $-100

Expected selling price = (0.3 x $100 x 3) + (0.7 x$100 x 1/10) += $97

Net gain = $97 - $100= $-3

To learn more about profit, please check: https://brainly.com/question/26181966

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