What is the mean and standard deviation of return

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Reference no: EM131467791

Question: Consider again the three investment plans of Problem. An investor who cannot decide which investment option to use has decided to toss two (fair) coins and pick the investment plan based on the random outcome of the coin toss. If two heads occur, Plan A will be used; if a head and a tail occurs, Plan B will be used; if two tails occur, Plan C will be used. What is the mean and standard deviation of return from the investment plan?

Problem: There are three investment plans for your consideration. Each plan calls for an investment of $25,000 and the return will be one year later. Plan A will return $27,500. Plan B will return $27,000 or $28,000 with probabilities 0.4 and 0.6, respectively. Plan C will return $24,000, $27,000, or $33,000 with probabilities 0.2, 0.5, and 0.3, respectively. If your objective is to maximize the expected return, which plan should you choose? Are there considerations that might be relevant other than simply the expected values?

Reference no: EM131467791

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