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    expected value and variance of randoam variable

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    Please see the attached file "Q11.5.doc" for the problem statement.

    suppose that w is normal and has expected value a and variance sigma^2. so the expected value of u = exp(w) is exp(a + 0.5sigma^2).
    What is the variance of u: var(u)?

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    Solution Preview

    Please see the attached file for detailed solution.

    By definition, the variance of random variable X ...

    Solution Summary

    The solution shows how to find out the variance of u, which is the exponential function of a normally distributed variable.