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You just purchased stake in a start-up company as part of a high-risk investment. You believe that ...

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You just purchased stake in a start-up company as part of a high-risk investment. You believe that ...

You just purchased stake in a start-up company as part of a high-risk investment. You believe that in a year from now this company may no longer exist, in which case your stake is worthless; there is a 81% chance of this happening. However, you also believe there is a 19% chance that your stake will be worth $27 million. What is the expected value of your stake in this start-up company?
Please round your final answer to the nearest dollar.

▸ $21.87 million

▸ $27 million

▸ $0

▸ $5.13 million

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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