Author Question: If an asset has a 35% probability of earning a 20% return and a 65% probability of earning a 5% ... (Read 71 times)

mrsjacobs44 · **on:** Apr 25, 2021

Question 1

Consider the following bet: heads I pay you a dollar, tails you pay me a dollar. What is the standard deviations of the payoffs (returns) of this bet? (Assume a fair coin.)
◦ -$1.00
◦ $0
◦ $0.50
◦ $1.00
◦ $10.00

Question 2

If an asset has a 35% probability of earning a 20% return and a 65% probability of earning a 5% return, what is its standard deviation?
◦ 1.2%
◦ 18.0%
◦ 7.2%
◦ 11.0%
◦ 12.2%

jamesnevil303 · **Reply #1 on:** Apr 25, 2021

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