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 Cesh Inflow Probability Cash Inflow Probability Cash Inflow Probability $120 0.40 $110 0.35 $100 0.30 130 0.20 130 0.30 130 0.40 140 0.40 150 0.35 160 0.30 The expected value for all three years is $130. Compute the standard deviation for each of the three years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard Deviation Year 1 Year 5 Year 10
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To calculate the standard deviation, we need to find the variance first. The variance is calculated by taking the sum of the squared differences between each cash inflow and the expected value, multiplied by their respective probabilities. For Year 5: Cash Show more…
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