What Is the Standard Deviation of the Payoff from an Investment

question 41

Multiple Choice

What is the standard deviation of the payoff from an investment that yields $1,000,000 with a probability of 0.001 and $0 with a probability of 0.999?

• A) $998,001,000
• B) $999,000
• C) $316.07
• D) $31,606.96

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Definitions:

Industry Sales

The total volume of sales made by all businesses within a specific industry.

Monopoly

A market structure characterized by a single seller who controls all the supply of a particular good or service, and where entry of new competitors is obstructed.

Credit-Rating Industry

The sector of the financial industry that provides assessments of the creditworthiness of borrowers to potential lenders.

Nationally Recognized

A status achieved by entities, individuals, products, or brands that are widely acknowledged and esteemed across an entire country.