An investment will pay $2,000 half of the time and $1,400 half of the time. The standard deviation for this investment is:

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Quizplus · Accepted Answer

The expected value (mean) of the investment is calculated as: (0.5 * $2,000) + (0.5 * $1,400) = $1,700. The variance is calculated as: 0.5 * ($2,000 - $1,700)^2 + 0.5 * ($1,400 - $1,700)^2 = 0.5 * 300^2 + 0.5 * 300^2 = 90,000 / 2 = 45,000. The standard deviation is the square root of the variance, which is sqrt(45,000) = $300.

An Investment Will Pay $2,000 Half of the Time and $1,400