2) (10 points) A group of economists have determined the probability associated

Question

2) (10 points) A group of economists have determined the probability associated with different economic scenarios. In addition, your company has determined the associated rofit/loss for those scenarios. The data is provided in the following table. f(x) 0.35 0.50 0.15 Scenario Recession No change Growth Profit/Loss (in million S) -$10 $1 $20 a) Calculate the expected profit/loss b) Calculate the standard deviation IF another group of economist's estimates yielded the same expected profit/loss but a standard deviation of $2.5 million, would using their estimates provide for a more stable projection? (i.e. what statistical measure would you use to quantify stability?) c)

Explanation / Answer

From the given data,

a) Mean = 0

b) Variance = 501

c)

SD of the given data = sqrt(501) = $22.38
Yes, The other group estimated provide for a more stable project since their SD only 2.5 million which is less than $22.38

Scenario f(x) Profit xf(x) (x-0)^2 Recession 0.35 -10 -3.5 100 No Change 0.5 1 0.5 1 Growth 0.15 20 3 400 Total: 0 501

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.