Suppose an investor is concerned about a business choice in which there are three prospects. The probability and returns are given below: Probability Returns 0.4 100 0.3 30 0.3 -30 What is the expected value of the uncertain investment? What is the variance?
Introduction Investment decisions often involve uncertainty. In such situations, investors rely on tools like expected value and variance to evaluate potential outcomes and associated risks. The expected value gives a measure of the average return one can anticipate, while the variance tells us how much the returns fluctuate around the average. In this answer, we […]