Exercise Solution 3.14

This is a bit of a trick question. Its purpose is to emphasize to you the general applicability of formula [3.28]. To solve the problem, recognize that Z = A + B. You know the standard deviations and correlation of A and B, so you can directly apply [3.28] to obtain a standard deviation for Z. The result is 4.74. The information that B = A2 – 2A – 4 is extraneous.

 

Welcome!

Enter your address for insights that will transform your risk management.

Click the link in the email I just sent you to confirm your address and start your subscription.

Defining Risk

Enter your email address to receive your copy and subscribe to Glyn's Risk Management Newsletter.

Click the link in the email I just sent you to download your paper and start your subscription.