A friend come to you and ask you to invest $10,000 on a stock. If you can only hold the stock for 1 year somehow obtain the following probability distribution of the return in 1 year: Return: -20% +0% +25% Probability: 1/3 1/3 1/3 Assuming a MARR of 5% and no inflation. a) What is the expected price of the stock in 1 year? b) Should you invest in the stock? (show your work)
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
A friend come to you and ask you to invest $10,000 on a stock. If you can only hold the stock for 1 year somehow obtain the following
Return: -20% +0% +25%
Probability: 1/3 1/3 1/3
Assuming a MARR of 5% and no inflation.
a) What is the expected price of the stock in 1 year?
b) Should you invest in the stock? (show your work)
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