Author Question: Consider an investment with the following payoffs and probabilities: State of the Economy ... (Read 11 times)

Haya94 · **on:** Jul 1, 2018

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

Question 2

If a car salesman is paid a fixed salary, the owner is most likely to see
a. A large volume of sales, with large margins
b. A large volume of sales with no margins
c. Low to no sales with low margins
d. Low sales but with large margins