document.write( "Question 925698: The value of one stock in a particular share is 150 pence. In a simple financial model, it is supposed that the next day, the share price will either decrease by 10%, stay the same, or increase by 5%. Each of these three events are assumed to be equally likely. Calculate the variance of the stock price on the next day. Give your answer correct to 1 decimal place \n" ); document.write( "
Algebra.Com's Answer #561687 by Theo(13342)\"\" \"About 
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the expected value of the stock is 1/3 * 135 + 1/3 * 150 + 1/3 * 157.5
\n" ); document.write( "do the calculations and the expected value is 147.5
\n" ); document.write( "calculate the variance of that as follows:
\n" ); document.write( "sum of squared difference between each data point and the mean is:
\n" ); document.write( "135 - 147.5 = -12.5 squared = 156.25 * 1/3 = 52.0833
\n" ); document.write( "150 - 147.5 = 2.5 squared = 6.25 * 1/3 = 2.0833
\n" ); document.write( "157.5 - 150 = 10 squared = 100 * 1/3 = 33.3333
\n" ); document.write( "add them up to get the sum of squares.
\n" ); document.write( "sum of squares = 87.4999 which can be rounded to 87.5
\n" ); document.write( "that's your variance.\r
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\n" ); document.write( "\n" ); document.write( "i verified with a statistics calculator that the standard deviation is equal to 9.35414...
\n" ); document.write( "square that and you get 87.5
\n" ); document.write( "since the variance is the standard deviation squared, the numbers check out and the solution looks good.\r
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