Tuesday, April 8, 2008
Standard Deviation: A Real Life Application
I would begin by asking this student “What do you need to get things you want?” He would most probably answer “money”. Then I would to proceed to ask the same student how much money they want to make someday. Anytime I have asked my students they have all told me at least a six figure salary. I would explain that when you have a lot of money people tend to invest in things such as stocks, bonds, and property, hoping for a big return. The example I found on www.wikipedia.org is, “Stock A historically returns 5% with a standard deviation of 10%, while Stock B returns 6% and carries a standard deviation of 20%. On the basis of risk and return, an investor may decide that Stock A is the better choice, because Stock B's additional percentage point of return generated (an additional 20% in dollar terms) is not worth double the degree of risk associated with Stock A.” By knowing the standard deviation it helps in making good decisions with one’s money.
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4 comments:
When responding to this blog assignment, I used grades as an example, but some students may not care about their grades. Money is definitely applicable to everyone. I think students would definitely see the importance of statistics, especially in high school, when dealing with money!
Yes! That is a great example to tell students. Money is so important to them and they do think that they will make tons of money. So, you can easily begin to explain banking and the various options a student will have to put their money in the bank. Interest will come into play and can be used as well. Money is a great real life example!
Nice Jon! Good example. Who isn't interested in money?! It's a good idea for students to be able to relate a mathematical concept to real life applications. My only suggestion is I would think of a different example for an urban school.
This was a really good idea to relate statisitcs back to money and the stick market. I think that this would really spark the students interest. It is also great you were able to tie in the standard deviation.
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