CFA Practice Question

CFA Practice Question

There are two possible future states, 1 and 2. The values of two random variables in the two states, and the probabilities of the two states are given in the table below.

State | Probability | Value of X | Value of Y
1 | 65% | 15 | 20
2 | 35% | 30 | 10

What is the expected value of (X2 - Y2)?
A. 319.8125
B. 166.25
C. 197.75
Explanation: Calculate X2 - Y2 for each state and weight by probability.

User Contributed Comments 1

User Comment
ninad123 w1*(x1^2-y1^2)+w2*(x2^2-y2^2)
-113.75+280
= 166.25
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