Question

Compcomm, Inc., is an international communications and information technology company that has seen the value of its common stock appreciate substantially in recent years. A stock analyst would like to use simulation to predict the stock prices of Compcomm for an extended period.
Based on historical data, the analyst has developed the following probability distribution for the movement of Compcomm stock prices per day:
Stock Price Movement .. Probability
Increase ......... .45
Same .......... .30
Decrease ........ .25
1.00
The analyst has also developed the following probability distributions for the amount of the increases or decreases in the stock price per day:


The price of the stock is currently 62.
Develop a Monte Carlo simulation model to track the stock price of Compcomm stock and simulate for 30 days. Indicate the new stock price at the end of the 30 days. How would this model be expanded to conduct a complete simulation of 1 year’s stock pricemovement?


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  • CreatedJuly 17, 2014
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