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    turtle5a1's Avatar
    turtle5a1 Posts: 18, Reputation: 1
    New Member
    		  
    #1

    Mar 9, 2010, 12:04 AM
    Corporate Finance - Variance
    I have a question which I can't seem to get the answer.

    Question:
    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
    0.10 500 400
    0.50 100 0
    0.40 0 -100

    Calculate the variance of this rate of return?

    Answer given was 20000(% squared).
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
    		  
    #2

    Mar 12, 2010, 12:18 AM

    This is more statistics/math related so I moved your post over here.
    Unknown008's Avatar
    Unknown008 Posts: 8,076, Reputation: 723
    Uber Member
    		  
    #3

    Mar 12, 2010, 04:47 AM
    For this, I believe you have to do a probability table, for these are discreet variables.

    Let X be the amount of profit
    Code:
    X      400   0   -100
P(X=x) 0.1  0.5   0.4
    The variance is given by
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