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| Teaching Since: | May 2017 |
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| Questions Answered: | 66690 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
1. A game of chance offers the following odds and payoffs. Each play of the game costs $100, so the net profit per play is the payoff less $100.
|
Probability |
Payoff |
Net Profit |
|
.10 |
$500 |
$400 |
|
.50 |
100 |
0 |
|
.40 |
0 |
_100 |
What are the expected cash payoff and expected rate of return? Calculate the variance and standard deviation of this rate of return.
2. The following table shows the nominal returns on the U.S. stocks and the rate of inflation.
a. What was the standard deviation of the market returns?
b. Calculate the average real return.
|
Year |
Nominal Return (%) |
Inflation (%) |
|
2004 |
+12.5 |
+3.3 |
|
2005 |
+6.4 |
+3.4 |
|
2006 |
+15.8 |
+2.5 |
|
2007 |
+5.6 |
+4.1 |
|
2008 |
-37.2 |
+0.1 |
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