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How to calculate the standard deviation for each investment

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Reference no: EM132658985

Suppose you are offered two investments with the following expected cash flows:

Economic               Probability of        Outcome for                      Outcome for

Scenario              Economic                 Scenario Investment 1                Investment 2

Boom                   20%                          $1,000                              $1,200

Normal                    50%                          750                               750

Bust                       30%                             250                              117

Question a. Calculate the expected value of each investment.

Question b. Calculate the standard deviation for each investment's possible outcomes.

Question c. Which investment is riskier? Explain.

Reference no: EM132658985

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