a venture capitalist, willing to invest $1,000,000, has three investments to choose from. the first…

a venture capitalist, willing to invest $1,000,000, has three investments to choose from. the first investment, a software company, has a 7% chance of returning $11,000,000 profit, a 21% chance of returning $1,000,000 profit, and a 72% chance of losing the million dollars. the second company, a hardware company, has a 12% chance of returning $7,000,000 profit, a 21% chance of returning $2,000,000 profit, and a 67% chance of losing the million dollars. the third company, a biotech firm, has a 10% chance of returning $4,000,000 profit, a 22% of no profit or loss, and a 68% chance of losing the million dollars. order the expected values from smallest to largest. third, second, first second, first, third first, second, third first, third, second third, first, second second, third, first

a venture capitalist, willing to invest $1,000,000, has three investments to choose from. the first investment, a software company, has a 7% chance of returning $11,000,000 profit, a 21% chance of returning $1,000,000 profit, and a 72% chance of losing the million dollars. the second company, a hardware company, has a 12% chance of returning $7,000,000 profit, a 21% chance of returning $2,000,000 profit, and a 67% chance of losing the million dollars. the third company, a biotech firm, has a 10% chance of returning $4,000,000 profit, a 22% of no profit or loss, and a 68% chance of losing the million dollars. order the expected values from smallest to largest. third, second, first second, first, third first, second, third first, third, second third, first, second second, third, first

Answer

Explanation:

Step1: Calculate expected - value for first company

The formula for expected value $E(X)=\sum_{i}x_ip_i$. For the first company: $E_1 = 0.07\times11000000+0.21\times1000000 + 0.72\times(- 1000000)$ $E_1=770000 + 210000-720000$ $E_1 = 260000$

Step2: Calculate expected - value for second company

$E_2=0.12\times7000000 + 0.21\times2000000+0.67\times(-1000000)$ $E_2 = 840000+420000 - 670000$ $E_2=590000$

Step3: Calculate expected - value for third company

$E_3=0.1\times4000000+0.22\times0+0.68\times(-1000000)$ $E_3 = 400000+0 - 680000$ $E_3=-280000$

Step4: Order the expected values

Since $E_3=-280000$, $E_1 = 260000$, $E_2=590000$, the order from smallest to largest is third, first, second.

Answer:

third, first, second