# Question

An investor buys the stock of two companies, investing $10,000 in each. The stock of each company either goes up by 80% after a month (rising to $18,000) with probability 1>2 or drops by 60% (falling to $4,000) with probability 1>2. Assume that the changes in each are independent. Let the random variable X denote the value of the amount invested after one month.

(a) Find the probability distribution of X.

(b) Find the mean value of X.

(c) Does the mean value represent the experience of the typical investor?

(a) Find the probability distribution of X.

(b) Find the mean value of X.

(c) Does the mean value represent the experience of the typical investor?

## Answer to relevant Questions

Imagine that the investor in Exercise 37 invests $10,000 for one month in a company whose stock either goes up by 80% after a month with probability 1>2 or drops 60% with probability 1 > 2. After one month, the investor ...Companies based in the United States that operate in foreign nations must convert currencies in order to pay obligations denoted in those currencies. Consider a company that has a contract that requires it to pay 1,000,000 ...A company orders components from Japan for its game player. The prices for the items that it orders are in Japanese yen. When the products are delivered, it must convert dollars into yen to pay the Japanese producer. When ...1. Consequence of positive covariance 2. Covariance between X and Y. 3. Property of uncorrelated random variables 4. Weighted sum of two random variables 5. Sharpe ratio of a random variable 6. Implies X and Y are ...Repeat the calculations of Exercise 33. Rather than treat the random variables X and Y as independent, assume that Cov(X, Y) = 12,500.Post your question

0