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    Expected Monetary Value for Investing in Stocks

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    A person is considering investing in stocks, bonds, or gold. The possibility exists that the person will not do anything. The payoff table for this is given below. The payoffs represent profits.

    State of Nature
    A B C
    Invest in Stocks -100 -200 1000
    Invest in Bonds 350 300 200
    Invest in Gold 150 250 300
    Do Nothing 0 0 0
    Probability 0.2 0.4 0.4

    What is the expected monetary value for investing in stocks?

    a. -200

    b. 300

    c. 283.33

    d. 1000

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    Solution Summary

    This solution discusses expected monetary value for investing in stocks.