A stock currently sells for $40. in the next month, there is a 60% chance that the stock price will double` P(X=$80) = 60%, and a 40% chance that the stock will drop` P(X=$20) = 40%. Find the expected price?

To find the expected price of the stock, you can use the formula for expected value (also known as the mean): Expected Value (E[X]) = Σ [x * P(x)] Where: - E[X] is the expected value (in this case, the expected price of the stock). - x is the possible outcomes. - P(x) is the probability of each outcome. In this scenario, there are two possible outcomes: the stock price doubling to $80 (with a probability of 60%) and the stock price dropping to $20 (with a probability of 40%). So, you can calculate the expected price as follows: E[X] = ($80 * 0.60) + ($20 * 0.40) E[X] = $48 + $8 E[X] = $56 So, the expected price of the stock is $56.