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Laura is going to invest in a business. There is a 50% chance that she will make $8000, a 40% chance that she will lose $4000, and a 10% chance that she will break even (make $0). What is the expected value for Laura's investment?

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Based on the various probabilities of outcomes, the expected value of the investment is $2,400

The expected value can be calculated as:

= ∑ (Probability of event happening x Payoff if event happens)

The expected value here is therefore:

= (50% x 8,000) + (40% x -4,000) + (10% x 0)

= $2,400

In conclusion, the expected value is $2,400.

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