
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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In the table below x denotes the X-Tract Company’s projected annual profit (in $1,000). The table also shows the probability of earning that profit. The negative value indicates a loss. |
x | f(x) | x = profit | ||
-100 | 0.01 | f(x) = probability | ||
-200 | 0.04 | |||
0 | ||||
100 | 0.26 | |||
200 | 0.54 | |||
300 | 0.05 | |||
400 | 0.02 |
10 | On average, |
a | $114.77 | thousand |
b | $112.52 | thousand |
c | $110.31 | thousand |
d | $108.15 | thousand |
Expert Solution

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Step 1
We need to find the standard deviation of profits.
Let Pn = Probability of state n
Xn = Profit of state n
Probability of 0 profit = 1 - (0.01 + 0.04 + 0.26 + 0.54 + 0.05 + 0.02) = 0.08
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