Consider an investment with the following payoffs and probabilities:
State of the economy Probability Return
GDP grows slowly .40 1,000
GDP grows fast .60 2,000
What is the expected value? What is the standard deviation of the investment?
(.40) (1,000) + (.60) (2,000) = 400+1200=1600
Standard deviation= 10,000,000 2 =3162.27
How do I get he standard deviation?
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