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M119L06-page15 - PART I INVESTING The benefit of a diverse...

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(Lesson 6: Measures of Spread or Variation; 3-3) 3.29 Example 4 We believe that the “vast majority” of textbooks in a campus bookstore have prices between $20 and $180. Estimate σ , the SD of textbook prices in the bookstore. Solution to Example 4 σ Realistic range 4 σ $180 $20 4 σ $160 4 σ $40 Again, this is a very rough estimate. We at least expect it to be on the correct order of magnitude, as opposed to, say, $4 or $400.
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Unformatted text preview: PART I: INVESTING The benefit of a diverse portfolio is that risk is spread out across many stocks. No single stock will destroy you. Your hope is that your stock portfolio will at least keep up with the general upward trend of the market over time. See the margin essay “More Stocks, Less Risk” on p.99....
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