Question

A particular investment can have only two possible outcomes: it can succeed or fail. There is...

A particular investment can have only two possible outcomes: it can succeed or fail. There is a 68% chance that the investment will succeed, and if this happens you forecast a return of 130%. Should the investment fail, you will experience a return of -25%.

What is the risk (as a standard deviation) of this asset? Answer in percentage without the symbol.

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Answer #1

Ans:- If success probability is 68% i.e 0.68, then failure probability will be 1 - 0.68 = 0.32

Therefore, the standard deviation of this asset is approx 72.30%.

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