The ________ is the reality that management is needed in all types and sizes of organizations, at all organizational levels, in
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Answer:
a) If you borrow $1,000, the EV is $1,100 and the standard deviation is $990.
b) If you borrow $2,000, the EV is $1,150 and the standard deviation is $1,485.
Explanation:
The expected value is the average return of the investment.
In this case there are only 2 chances: Low ($700 per $1,000) and High ($1,400 per $1,000). Both have 50% chances of happening.
So the expected value is:
The standard deviation can be calculated as
Case 1: If you borrow $1,000, invest, and then return the $1,000
Low return: 2000*(700/1000)-1000 = 2000*0.7-1000 = 400
High return: 2000*(1400/1000)-1000 = 2000*1.4-1000 = 1800
So the expected value is:
The standard deviation can be calculated as
Case 1: If you borrow $2,000, invest, and then return the $2,000
Low return: 3000*(700/1000)-2000 = 3000*0.7-2000 = 100
High return: 3000*(1400/1000)-2000 = 3000*1.4-2000 = 2,200
So the expected value is:
The standard deviation can be calculated as