3. Consider a share that is modelled by a binomial random variable. The probability that the share increases in value by 30¢ in one month is 0.65. The probability that it decreases in value by 30¢ in one month is 0.35. The share is held for 8 months then sold. Let X denote the number of increases in the price of the share over the 8 months. (a) Find E(X) and o(X). (b) Let Y be the random variable which models the change in share price. Then Y = 0.3X – 0.3(8 – X) because 0.3X is the total increase in share price and 0.3(8 – X) is the total decrease in share price. Simplify the expression for Y in terms of X. Then using (a), find E(Y) and o(Y).

3. Consider a share that is modelled by a binomial random variable. The probability that the share increases in value by 30¢ in one month is 0.65. The probability that it decreases in value by 30¢ in one month is 0.35. The share is held for 8 months then sold. Let X denote the number of increases in the price of the share over the 8 months. (a) Find E(X) and o(X). (b) Let Y be the random variable which models the change in share price. Then Y = 0.3X – 0.3(8 – X) because 0.3X is the total increase in share price and 0.3(8 – X) is the total decrease in share price. Simplify the expression for Y in terms of X. Then using (a), find E(Y) and o(Y).

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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