Answer: 4
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Work Shown:
A = event of losing $100
P(A) = probability event A occurs = 0.20
V(A) = net gain of event A happening = -100
B = event of gaining $30
P(B) = probability event B occurs = 0.80
V(B) = net gain of event B happening = 30
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E(X) = expected value
E(X) = P(A)*V(A) + P(B)*V(B)
E(X) = 0.20*(-100) + 0.80*(30)
E(X) = 4
The expected value is $4
This means the investor expects to get an average return of $4.
