The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows...
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Finance
The Oklahoma Pipeline Company projects the following pattern of inflows from an investment. The inflows are spread over time to reflect delayed benefits. Each year is independent of the others.
| Year 1 | Year 5 | Year 10 | |||||||||||||||||
| Cash Inflow | Probability | Cash Inflow | Probability | Cash Inflow | Probability | ||||||||||||||
| $ | 85 | 0.40 | $ | 60 | 0.35 | $ | 50 | 0.30 | |||||||||||
| 110 | 0.20 | 110 | 0.30 | 110 | 0.40 | ||||||||||||||
| 135 | 0.40 | 160 | 0.35 | 170 | 0.30 | ||||||||||||||
The expected value for all three years is $110. Compute the standard deviation for each of the three years.
Year 1
Year 5
Year 10
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