Question: An investment firm is considering two alternative investments, A & B under two possible future sets of economic conditions, good & poor. There is a .60 probability of good economic conditions occurring and a .40 probability of economic conditions occurring. The expected gains & losses under each economic type of conditions are shown in the following table.
Economic Conditions
|
Investment
|
Good
|
Poor
|
A
|
$900,000
|
-800,000
|
B
|
$120,000
|
$70,000
|