Question

Which plan has the least amount of risk? Plan APayout P(Payout) $20,000 0.19 $30,000 0.39 $70,000...

Which plan has the least amount of risk? Plan APayout P(Payout) $20,000 0.19 $30,000 0.39 $70,000 0.42 Plan BPayout P(Payout) $40,000 0.43 $50,000 0.38 $80,000 0.19

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Homework Answers

Answer #1

plan A

Var(X) = E(X^2) - (E(X))^2

x p xp x^2 P
20000 0.19 3800 76000000
30000 0.39 11700 3.51E+08
70000 0.42 29400 2.06E+09
44900 2.49E+09
variance 468990000
sd 21656.177

plan B

x p xp x^2 P
40000 0.43 17200 6.88E+08
50000 0.38 19000 9.5E+08
80000 0.19 15200 1.22E+09
51400 2.85E+09
variance 212040000
sd 14561.593

since sd(plan B) is less than sd of plan A

plan B has least amount of risk

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