4.32 INVESTMENT RISK ANALYSIS. The risk of a portfolio of financial assets is sometimes called investment risk. In general, investment risk is typically measured by computing the variance or standard deviation of the probability distribution that describes the decision maker's potential outcomes (gains or losses). The greater the variation in potential outcomes, the greater the uncertainty faced by the decision maker; the smaller the variation in potential outcomes, the more predictable the decision maker's gains or losses. The two discrete probability distributions given in the next table were developed from historical data. They describe the potential total physical damage losses next year to the fleets of delivery trucks of two different firms. Look at the table in Ex 4.32 (p 203), which provides the probability distribution for two random variables: loss next year for firm A (denoted by X) and loss next year for firm B (denoted by Y). For each random variable, find the mean, variance, and standard deviation? Firm A Firm B Loss Next Year Probability Loss Next Year Probability 500 200 01 1,000 700 1,500 1.200 2,000 1,700 2.500 2,200 .30 3,000 2,700 30 3.500 3,200 4,000 3,700 02 4,500 4,200 5,060 4,700 01