You have the opportunity to purchase a MLB Franchise. The probability distribution of expected returns for the franchise is as follows:

Question

You have the opportunity to purchase a MLB Franchise. The probability distribution of expected returns for the franchise is as follows:
Probability Rate of Return
0.1 –20%
0.2 0%
0.4 7%
0.2 15%
0.1 25%
The expected rate of return for your investment in the MLB Franchise is____Expected rate of return = ∑Piki. The standard deviation is_____.

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Hải Đăng 1 week 2021-07-21T20:48:59+00:00 1 Answers 2 views 0

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    2021-07-21T20:50:19+00:00

    Answer:

    The expected rate of return is 6.3%.

    The standard deviation is of 11.29%.

    Step-by-step explanation:

    Expected rate of return

    Multiply each rate by its probability. So

    E = 0.1(-20) + 0.2(0) + 0.4(7) + 0.2(15) + 0.1(25) = 6.3

    The expected rate of return is 6.3%.

    Standard deviation:

    Square root of the difference squared between each value and the mean, multiplied by the probability. So

    S = \sqrt{0.1(-20-6.3)^2 + 0.2(0-6.3)^2 + 0.4(7-6.3)^2 + 0.2(15-6.3)^2 + 0.1(25 - 6.3)^2} = 11.29

    The standard deviation is of 11.29%.

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