QB3A1

There is a 40% probability that an investment will earn 10%, a 40% probability that the investment will earn 12.5%, and a 20% probability that the investment will earn 30%. What are the mean expected return and the standard deviation of expected returns, respectively?

Mean = (0.4)(10) + (0.4)(12.5) + (0.2)(30) = 15%Var = (0.4)(10 - 15)^2 + (0.4)(12.5 - 15)^2 + (0.2)(30 - 15)^2 = 57.5Weight of investment x squared deviationStandard deviation = √57.5 = 7.58

If X and Y are independent events, what does P(X or Y) = ?

P(X or Y) = (P(X) x P(Y))and P(X or Y) = P(X) + P(Y) - P(X and Y)

If the probability of both a new Wal-Mart and a new Wendy's being built next month is 68% and the probability of a new Wal-Mart being built is 85%, what is the probability of a new Wendy's being built if a new Wal-Mart is built?

P(AB) = P(A|B) × P(B)0.68 / 0.85 = 0.80

What does the labeling formula determine?

The labeling formula determines the number of different ways to assign a given number of different labels to a set of objects.

What is the permutation formula used for?

The permutation formula is used to find the number of possible ways to draw r objects from a set of n objects when the order in which the objects are drawn matters.

What is the computation formula used for?

The combination formula ("n choose r") is used to find the number of possible ways to draw r objects from a set of n objects when order is not important.