Question

Problem 6.17

Ben would like to invest in gold and is aware that the returns on such an investment can be quite volatile. Use the following table of states, probabilities, and returns and determine

Probability

Return

Boom	0.1	27%
Good	0.2	16%
Ok	0.3	7%
Level	0.2	3%
Slump	0.2	-30%

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What is the expected return on Ben’s gold investment? (Round answer to 3 decimal places, e.g. 0.076.)

Expected return

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What is the standard deviation of the return on Ben’s gold investment? (Round intermediate calculations and answer to 5 decimal places, e.g. 0.07680.)

Standard deviation

Answer 1