Question

If there’s a 40% chance of making $1 million and a 60% chance of losing $600,000, then the expected monetary outcome is

Answer 1

Answer:

$-40,000

Explanation:

Calculation for the expected monetary outcome

Using this formula

Expected monetary outcome=Probability x Affect

Let plug in the formula

Expected monetary outcome=0.4 x $1,000,000=$400,000

Expected monetary outcome= 0.6x $600,000=$360,000

Expected monetary outcome=$360,000-$400,000

Expected monetary outcome=$40,000 loss

Therefore the Expected monetary outcome will be a loss of $40,000