Question

Potential Loss Probability S 500 $1,000 0.40 ().20 0.40 There is a PDF file attached that shows those three distribu Enter in the space provided, what is the standard deviation

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Answer #1

In the given case, expected loss would be (0*0.4)+(500*0.2)+(1000*0.4)= 500

(Value - expected value)^2 for the given 3 values in order would be

(-500)^2= 250000

0^2= 0

(500)^2= 250000

These values multiplied with probability would be

100000

0

100000

Adding the 3 values up, variance would be 200000

SD would be square of variance which would be 447.21.

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