Problem: An individual has to choose between investment A and investment B. The individual estimates that the income and probability of the income from each investment are as given in the following table:
....Investment A..............................Investment B
Income.....Probability................Income.........Probability
$4000...........0.2........................$4000..............0.3
$5000...........0.3........................$6000..............0.4
$6000...........0.3........................$8000..............0.3
$7000...........0.2
a) Using excel statistical tool, calculate the standard deviation of the distribution of each investment.
b) Which of the two investments is more risky?
c) Which investment should the individual choose?