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    Standard deviation of possible sales prices

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    A firm has decided to invest in a piece of real estate. Management has estimated that the real estate can be sold in 5 years for the following possible prices:
    Price Possibility
    $20,000 .20
    $25,000 .25
    $30,000 .30
    $35,000 .25

    What is the standard deviation of possible sales prices?
    (First determine expected sales price).

    © BrainMass Inc. brainmass.com October 7, 2022, 7:35 am ad1c9bdddf

    Solution Preview

    Expected price = summation of pi Xi

    Sale price (Xi) Probability (Pi) Pi Xi

    $20,000 0.2 $4,000
    $25,000 0.25 $6,250
    $30,000 0.3 $9,000
    $35,000 ...

    Solution Summary

    The solution calculates standard deviation of possible sales prices.