Answer to Question #245355 in Statistics and Probability for gab

Question

Your friend is asking you to invest in his bakery, and you have 35000. The returns are volatile, and you may get either 43000 with a probability of 0.44 or 27000 with a probability of 0.56.

Answer 1

Those are the questions:

a. What is the expected value of the investment?  

b. Will you buy the refrigerator? Why? 

c. Identify the mean, variance, and standard deviation.

(a) The expected value is $43000*0.44+35000*0.56=34040$

(b) It would more likely unprofitable to buy refrigerator cause there is higher probability of disadvantageously outcome

(c) The mean is $(43000+27000)*0.5=35000$

The variance is $43000^{2}*0.44+27000^{2}*0.56 - 34040^{2}=63078400$

The standart deviation is the square root from the variance and equal to 7942.19