Consider a random variable $X$ that represents the profit (in thousands of dollars) from a new investment strategy. The variable $X$ can take the following values with their respective probabilities: $10,000$ with probability $0.2$ $20,000$ with probability $0.5$ $-5,000$ with probability $0.3$ To evaluate this investment strategy, we want to calculate the expected value $E(X)$ of the profit.

Exam

CFA Level 1

Section

Difficulty

Quantitative Methods

Expected Value Calculation for Investment Profit

Easy Probability Concepts Expected Value And Variance

Consider a random variable $X$ that represents the profit (in thousands of dollars) from a new investment strategy. The variable $X$ can take the following values with their respective probabilities:

$10,000$ with probability $0.2$
$20,000$ with probability $0.5$
$-5,000$ with probability $0.3$

To evaluate this investment strategy, we want to calculate the expected value $E(X)$ of the profit.

$10,000

$15,500

$6,000

Hint

Submitted12.3K

Correct10.3K

% Correct84%