Exercise 3 Answer

Exercise 3 Answer - 0.8 12000 0.8*12000 9600...

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Event P(X) Profit/Loss X*P(X) X*P(X) (X-E(X)^2)*P(X) Downturn 0.2 -3000 0.2*(-3000) -600 (-3000-1000)^2*0.20 3200000 Growth 0.8 2000 0.8*2000 1600 (2000-1000)^2*0.80 800000 E(X) =====> 1000 Variance======================> 4000000 Standard deviation 2000 CV 200% Event P(X) Profit/Loss X*P(X) X*P(X) (X-E(X)^2)*P(X) Downturn 0.2 -5000 0.2*(-5000) -1000 (-5000-1000)^2*0.20 7200000 Growth 0.8 2500 0.8*2500 2000 (2500-1000)^2*0.80 1800000 E(X) =====> 1000 Variance======================> 9000000 Standard deviation 3000 CV 300% Downturn 0.2 7000 0.2*(7000) 1400 (7000-11000)^2*0.20 3200000 Growth
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Unformatted text preview: 0.8 12000 0.8*12000 9600 (12000-11000)^2*0.80 800000 E(X) =====> 11000 Variance======================> 4000000 Standard deviation 2000 CV 18% Event P(X) Profit/Loss X*P(X) X*P(X) (X-E(X)^2)*P(X) Downturn 0.2 5000 0.2*(5000) 1000 (5000-11000)^2*0.20 7200000 Growth 0.8 12500 0.8*12500 10000 (12500-11000)^2*0.80 1800000 E(X) =====> 11000 Variance======================> 9000000 Standard deviation 3000 CV 27% I will select the investment with the smaller CV as it is less risky of the two....
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