An investment opportunity is a sure thing; it will pay off $100 regardless of which of the three possible outcomes comes to pass. The variance of this investment opportunity:
A) is 0.
B) is 1.
C) is 2.
D) is -1.
E) cannot be determined without knowing the probabilities of each of the outcomes.

Question

Quizplus · Accepted Answer

Since the investment opportunity will always pay off $100 regardless of which outcome occurs, there is no variability or risk involved. Therefore, the variance of the investment opportunity is 0.

An Investment Opportunity Is a Sure Thing; It Will Pay