Re: Homework Question(my brain is obviously fried if i cant do this...
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your investment has a .7 chance of doubling after a year and a .3 chance of halving after a year. what is the SD on the ROR?
rj
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Havent done this in awhile, but Ill try to help.
Investment 0.5x 2x
p(x) 0.3 0.7
E(x) = 0.5(0.3) + 2(0.7) = 1.55x
E(X^2) = (0.3)$50^2 + (0.7)($200)^2 = 2.875x
V(X) = 2.875 - 1.55^2 = .4725x
SD = sqrt(.4725) = .68739x
Hope thats what you are looking for...
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