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An investment opportunity has two possible outcomes. The expected value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the payoff of the other outcome

Respuesta :

Answer:

$300

Explanation:

Given:

Investment opportunity = $250

Total possible outcomes = 2

Payoff yield of first outcome = $100

probability of first outcome = 0.25

Computation:

Probability of all outcomes = 1

Probability of second outcome = 1 - probability of first outcome

= 1 - 0.25

= 0.75

Payoff yield of second outcome = (Payoff yield of first outcome x Probability of second outcome) / Probability of first outcome

= ($100 x 0.75) / 0.25

= $300