You are considering a $7,000 investment. The table shows the possible outcomes in cash flow next...
You are considering a $7,000 investment. The table shows the possible outcomes in cash flow next year. What is the standard deviation of the returns? Round your answer to the nearest tenth. table 1.4% 2.8% 6.0% 8.1%
Probability Possible Cash Flow
0.1 $925
0.2 $680
0.4 $485
Homework Answers
| p(x) | return | p*x | p*(x - mean)^2 |
| 0.1 | 1.40% | 0.0014 | 0.0001706 |
| 0.2 | 2.80% | 0.0056 | 0.0001491 |
| 0.4 | 6.00% | 0.024 | 8.836E-06 |
| 0.3 | 8.10% | 0.0243 | 0.000198147 |
Standard dev = 2.29%
I have assumed that the returns mentioned are linked to the probability with the last reutrn having a probability of (1 - 0.1-0.2-0.4)
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