An investment with initial value zero can go up or down $10,000 per month with equal likelihood.

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(a) What is probability that the investment will reach $1,000,000 without reaching –$250,000?

(b) What is the probability that the investment will reach $1,000,000 twice without reaching –$250,000?

(c) Suppose the up vs. down probabilities are different. What is the minimum win probability p that would make it more likely than not to reach +$1M before hitting –$250K?

Related Book For answer-question

Managerial Economics Markets and the Firm

ISBN: 978-0618988624

2nd edition

Authors: William Boyes

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Posted Date: Aug 19, 2020 07:02 PM

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An investment with initial value zero can go up or down $10,000 per month with equal likelihood.

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ANSWERA THE PROBABILITY THAT THE INVESTMENT WILL REACH 1000000 WIT... View the full answer

Managerial Economics Markets and the Firm

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