In investment, a man can make a profit of Rs. 5,000 with a probabilit

In investment, a man can make a profit of Rs. 5,000 with a probability of 0.62 or a loss of Rs. 8,000 with a probability of 0.38. Find the expected gain.

Answer»

Let X be the random variable which denotes the gain in the investment. It is given that X takes the value 5000 with probability 0.62 and -8000 with a probability 0.38.

(Note that we take -8000 since it is a loss)

The probability distribution is given by

X = x	-8000	5000
P(X = x)	0.38	0.62

E(X) = (0.38) (-8000) + (0.62) (5000)

= -3040 + 3100

= 60

Hence the expected gain is Rs. 60

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In investment, a man can make a profit of Rs. 5,000 with a probability of 0.62 or a loss of Rs. 8,000 with a probability of 0.38. Find the expected gain.

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