Author Question: For a given expected value, the smaller the standard deviation of the expected value, the larger the ... (Read 91 times)

APUS57 · **on:** Jul 1, 2018

For a given expected value, the smaller the standard deviation of the expected value, the larger the risk.

Indicate whether the statement is true or false

Question 2

Expected value represents the average of all outcomes if one were to undertake the risky event many times over and over again.

What will be an ideal response?

jessofishing · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

False. The smaller the standard deviation, the smaller the associated risk. The standard deviation is the square root of the variance, thus the smaller the variance, the smaller the standard deviation. The smaller the variance of the expected value, the smaller the risk.

Answer to Question 2

True. The expected value is not expected on any one outcome, because it represents the average of many outcomes.