Answer:
(i) (-$5.4)
(ii) (-$162) Loss
Explanation:
(a) Probability of good days (P1) = 24% = 0.24 and Gain on a good day = $390
Probability of bad days (P2) = 36% = 0.36 and Loss on a bad day = $275
Probability of rest of the time (P3) = 0.40 and break even
Expected value of Scott's day trading hobby:
= P1 × Gain on a good day + P2 × Loss on a bad day + P3 × $0
= 0.24 × $390 + 0.36 × (-$275) + 0.40 × 0
= $93.6 - $99
= -$5.4
(b) We need to find the money would be expect, after 1 month (30 days):
= 30 days × Expected value of Scott's day trading hobby
= 30 days × (-$5.4)
= (-$162) loss