Consider an investment with the following payoffs and probabilities: State of the Economy Probability Return GDP grows slowly .70 1,000 GDP grow fast .30 2,000 Let the expected value in this example be 1,300 . How do we find the standard deviation of the investment?
a. ? = ? { (1000-1300)2 + (2000-1300)2 }
b. ? = ? { (1000-1300) + (2000-1300) }
c. ? = ? { (.5)(1000-1300)2 + (.5)(2000-1300)2 }
d. ? = ? { (.7)(1000-1300) + (.3)(2000-1300) }
e. ? = ? { (.7)(1000-1300)2 + (.3)(2000-1300)2 }
e
Economics
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