Question: A. The client needs to decide if he should invest on the stocks of a food delivery company, called Pippo. The annual profit per 100

A. The client needs to decide if he should invest on the stocks of a food delivery company, called Pippo. The annual profit per 100 invested for Pippo has been estimated that will follow the probability distribution in the following table:

Pippo

Profit per 100

Probabilities

160

0.10

120

0.25

700

0.20

200

0.15

-300

0.20

-800

0.10

A second stock, of the rival food delivery company called Paperino has the following estimated profit per 100 invested and associated probabilities:

Paperino

Profit

Probabilities

85

0.10

60

0.25

45

0.20

25

0.15

15

0.20

10

0.10

The client is also investigating the possibility to invest in stocks related to delivery companies and wants to estimate the average rate of return for the stocks of a delivery companies. It has been estimated that standard deviation for delivery companies stocks is approximately 20%. The client wants to estimate a 95% confidence interval for the average rate of return that must extend no more than 2% on each side of the sample mean.

The client will conduct this analysis only if the sample observations needed are less than 100. Can you suggest if he needs more or less than 100 observations? [5 marks]

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