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Basic Question 0 of 4

There are ten marbles in a box: one red, three yellow, and six blue. You pick one marble from the box for 75 cents. You win $5 if you pick a red marble, $1 if you pick a yellow marble, and nothing if you pick a blue marble. If you play the game once, what is your expected net gain?

A. $0.35
B. $1.25
C. $0.05
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User Contributed Comments 3

User Comment
wundac much more logical with real numbers
khalifa92 then read the example in LOS
thevinu Weighted Avg - Cost
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Your review questions and global ranking system were so helpful.
Lina

Lina

Learning Outcome Statements

describe the process of calibrating a binomial interest rate tree to match a specific term structure;

describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node;

compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice;

CFA® 2025 Level II Curriculum, Volume 4, Module 27.