Question
Granny Maggie has been investing in government bonds and corporate stocks since her mid 30s. Now, in her 60s, she is interesting to try to
Granny Maggie has been investing in government bonds and corporate stocks since her mid 30s. Now, in her 60s, she is interesting to try to invest in gold after receiving some advice from her friend. She would like to invest in gold and is aware that the returns on such an investment can be quite volatile. Read carefully the following table of states, probabilities, and returns.
| Probability | Return |
Boom | 0.1 | 40.00% |
Good | 0.2 | 30.00% |
OK | 0.3 | 15.00% |
Level | 0.2 | 2.00% |
Shimp | 0.2 | -12.00% |
determine the expected return and the standard deviation of the return on Granny's gold investment.
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