So I tried solving the first one and apparently failed miserably, attempted both twice and got it wrong each time and I have one submission attempt left, so any help is definitely appreciated!

Question

1. Hotels R Us has kept the following recordes concerning the number of guests in a room.

Number of Guests | Probability
1 | .35
2 | .4
3 | .1
4 | .15

The Expected number of guests in a room is ____.
The standard deviation of the number of guests in a room is ___.
(Note: keep two decimals. Please keep more decimals during the middle steps so the final answer can match up.)

2. You are considering two mutual funds for your investment. The possible returns for the funds are dependent on the state of the economy and are given in the accompanying table.

State of the Economy | Fund A | Fund B
Good | 20% | 40%
Fair | 10% | 20%
Poor | -10% | -40%

You believe that the likelihood is 20% that the economy will be good, 50% that it will be fair, and 30% that it will be poor.

Which fund will you pick if you are risk averse?

Again, thanks in advance!!

Answer 1

Exp = 1(.35) + 2(.4) + 3(.1) + 4(.15)
= .35 + .8 + .3 + .6
= 2.05
Variance = 1^2 (.35) + 2^2(.4) + 3^2(.1) + 4^2(.15)
= .35 + 1.6 + .9 + 2.4
= 5.25
Sd = sqrt(5.25-(2.05)^2)
= 1.02

Answer 2

Thank you!!
And I also figured out the second one. APpreciate it!

Answer 3

If you're risk adverse you will go with Fund A because it has lower risk than Fund B.