You are trying to decide whether to invest some idle cash in undeveloped land or gold. You intend to hold either investment for 5 years before selling out and sailing the Caribbean. You have made the following estimates of the value of the land and gold 5 years from now:
Land
Probability Cash Flow
0.2 $60,000
0.5 $80,000
0.3 $100,000
Gold
Probability Cash Flow
0.3 $40,000
0.4 $85,000
0.3 $140,000
1) What is the expected value of each investment?