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otez555 [7]
3 years ago
11

A project has a .7 chance of doubling your investment in a year and a .3 chance of halving your investment in a year. What is th

e standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation __________%.
Biology
1 answer:
sergey [27]3 years ago
5 0

Answer:

68.74%

Explanation:

To find the Standard Deviation:

First find expected return.

(0.7*100%)+(0.3*-50%) =70-15= 55%

Then the Variance.

[0.7*(1-0.55)^2]+[.3*(-0.5-0.55)^2]  

=0.14175+0.33075

=0.4725

=47.25%

The Standard Deviation is the square root of the variance.

\sqrt{0.4725}

=0.6874

=68.74%

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