Expected value, variance & standard deviation
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4.11 An investment syndicate is trying to decide which two $200,000 apartment houses to buy. An advisor estimates the following probabilities for a five-year net returns ( in thousands of dollars):
Return: -50 0 50 100 150 200 250
Probability for house 1: .02 .03 .20 .50 .20 .03 .02
Probability for house 2: .15 .10 .10 .10 .30 .20 .05
a. Calculate the expected net return for house 1 and for house 2.
b. Calculate the respective variances and standard deviations.
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