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Deviation
- Difference between the expected and actual payoff
- Adjusting for the negative numbers
- The standard deviation measures square root of average of squares of the deviations of the payoffs associated with every outcome from their expected value.
- The standard deviation can be given by:
Suppose that nominal interest income is taxed at a rate of 30%. Calculate the before-tax real interest rate and the after-tax real interest rate if the nominal interest rate is 6%
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