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You are interested in a risky investment offered by your broker. If the S&P 500 index increases by 5% or more over the next month
You are interested in a risky investment offered by your broker. If the S&P 500 index increases by 5% or more over the next month you receive 1,000. (You think that the probability of this event is 0.86.) Otherwise you receive nothing. The cost of the investment is 840. What is the standard deviation of the return? (Hint: Calculate the expected return first.)
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