You pay $1,000 to flip a two-sided,fair coin at the local fair.If you flip heads,you walk away with $3,000,a return of 200%.However,if you flip tails,you walk away with $250,a return of -75%.What is the standard deviation of the returns?
A) 0.1375%
B) 1.375%
C) 13.75%
D) 137.5%
E) 1,375%

Question

Quizplus · Accepted Answer

Expected return = E(k) = Pr₁k₁ + Pr₂k₂ + ... + Pr_nk_n Expected return = (0.5 × 2) + (0.5 × - 0.75) = 0.625 Next, use the expected return to calculate the standard deviation: Standard deviation = 11ea7fdb_fc12_899d_a768_1164615dc60b_TB2902_11 Standard deviation = 11ea7fdb_fc12_899e_a768_3513aff00095_TB2902_11 Standard deviation =1.375 or 137.5%

You Pay $1,000 to Flip a Two-Sided,fair Coin at the Local