Welcome To

2020
Lecturer: Abdirisak Ali Mohamed
Chapter

05
Risk and Capital Budgeting
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ACTUAL MEASUREMENT OF RISK

Table 13–1: Probability distribution of outcomes

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We compute two important statistical measures— the
expected value and the standard deviation.
The expected value is a weighted average of the
outcomes (D) times their probabilities (P).
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 Generally, the larger the coefficient of variation, the

greater is the risk.
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