Measured by the standard deviation

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Assume interest rate is 5%

We are uncertain about the project. The annual profit has two outcomes, a gain $700 or a loss $(-300). The probability of a loss is 0.2.

The useful life has two outcomes: either 5 or 2 years, each with probability 0.5. The life and the benefit are independent.

What is the risk of this project (measured by the standard deviation)?

Reference no: EM131537369

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