The revunue X from the sales of a compay has an expected val

The revunue (X) from the sales of a compay has an expected value of $7,403, with a standard deviation of $551 while the cost (Y) has an expected value of $4,566, with a standard deviation of $348. The covariance between the revenue and cost is 1,434. What is the variance of the profit (X-Y) of the company?

Solution

variance of the profit (X-Y) = Variance of revenue-variance of cost-Covarinace between revenue and cost

Variance=Square of standard deviation

Variance (X-Y)=(551)²+(348)²-(1434)

=303601+21104-1434

profit(X-Y)=423271