Mathematics, 12.07.2021 17:50 drew1146
A certain financial theory posits that daily fluctuations in stock prices are independent random variables. Suppose that the daily price fluctuations (in dollars) of a certain value stock are independent and identically distributed random variables X1, X2, X3,..., with EXi = 0.01 and Var Xi = 0.01. (Thus, if todayâs price of this stock is $50, then tomorrowâs price is $50 + X1, etc.) Suppose that the daily price fluctuations (in dollars) of a certain growth stock are independent and identically distributed random variables Y1, Y2, Y3,..., with EYj = 0 and Var Yj = 0.25.
Now suppose that both stocks are currently selling for $50 per share and you wish to invest $50 in one of these two stocks for a period of 400 market days. Assume that the costs of purchasing and selling a share of either stock are zero.
(a) Approximate the probability that you will make a profit on your investment if you purchase a share of the value stock.
(b) Approximate the probability that you will make a profit on your investment if you purchase a share of the growth stock.
(c) Approximate the probability that you will make a profit of at least $20 if you purchase a share of the value stock.
(d) Approximate the probability that you will make a profit of at least $20 if you purchase a share of the growth stock.
(e) Assuming that the growth stock fluctuations and the value stock fluctuations are independent, approximate the probability that,
Answers: 3
Mathematics, 21.06.2019 15:30, elijah1090
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Mathematics, 21.06.2019 23:00, kj44
Each of the following data sets has a mean of x = 10. (i) 8 9 10 11 12 (ii) 7 9 10 11 13 (iii) 7 8 10 12 13 (a) without doing any computations, order the data sets according to increasing value of standard deviations. (i), (iii), (ii) (ii), (i), (iii) (iii), (i), (ii) (iii), (ii), (i) (i), (ii), (iii) (ii), (iii), (i) (b) why do you expect the difference in standard deviations between data sets (i) and (ii) to be greater than the difference in standard deviations between data sets (ii) and (iii)? hint: consider how much the data in the respective sets differ from the mean. the data change between data sets (i) and (ii) increased the squared difference îł(x - x)2 by more than data sets (ii) and (iii). the data change between data sets (ii) and (iii) increased the squared difference îł(x - x)2 by more than data sets (i) and (ii). the data change between data sets (i) and (ii) decreased the squared difference îł(x - x)2 by more than data sets (ii) and (iii). none of the above
Answers: 2
A certain financial theory posits that daily fluctuations in stock prices are independent random var...
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