Problem:
Ben would like to invest in gold and is aware that the returns on such an investment can be quite volatile. Use the following table of states, probabilities, and returns and determine
Probability Return
Boom 0.1 40%
Good 0.2 30%
Ok 0.3 15%
Level 0.2 2%
Slump 0.2 -12%
Required:
Question: What is the expected return on Ben's gold investment? What is the standard deviation of the return on Ben's gold investment?
Note: Please explain comprehensively and give step by step solution.