It’s been a bad day for the market, with 80% of securities losing value. You are evaluating a portfolio of 15 securities and will assume a binomial distribution for the number of securities that lost value.
a.* What assumptions are being made when you use a binomial distribution in this way?
b.* How many securities in your portfolio would you expect to lose value?
c.* What is the standard deviation of the number of securities in your portfolio that lose value?
d.* Find the probability that all 15 securities lose value.
e.* Find the probability that exactly 10 securities lose value.
f. Find the probability that 13 or more securities lose value.