An investor is concerned with the market return for the coming year, where the market return isdefined as the percentage gain (or loss, if negative) over the year. The investor believes thereare five possible scenarios for the national economy in the coming year: rapid expansion,moderate expansion, no growth, moderate contraction, and serious contraction. Furthermore,she has used all of the information available to her to estimate that the market returns for thesescenarios are, respectively, 23%, 18%, 15%, 9%, and 3%. That is, the possible returns varyfrom a high of 23% to a low of 3%. Also, she has assessed that the probabilities of theseoutcomes are 0.12, 0.40, 0.25, 0.15, and 0.08. Use this information to describe the probabilitydistribution of the market return.Compute the following for the probability distribution of the market return for the coming year.:1. Mean,2. Variance,3. Standard deviation

The probability distribution is tabulated form of values of return x and corresponding probabilities…

Answered: An investor is concerned with the…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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An insurance company offers four different deductible levels-none, low, medium, and high-for its homeowner's policyholders and three different levels-low, medium, and high-for its automobile policyholders. The accompanying table gives proportions for the various categories of policyholders who have both types of insurance. For example, the proportion of individuals with both low homeowner's deductible and low auto deductible is 0.07 (7% of all such individuals). Auto L M H Homeowner's NLMH Suppose an individual having both types of policies is randomly selected. (a) What is the probability that the individual has a medium auto deductible and a high homeowner's deductible? 0.04 0.07 0.05 0.02 0.07 0.09 0.20 0.11 0.02 0.03 0.15 0.15 (b) What is the probability that the individual has a low auto deductible? A low homeowner's deductible? auto deductible homeowner's deductible (c) What is the probability that the individual is in the same category for both auto and homeowner's deductibles?…
Below are percentages for annual sales growth and net sales attributed to loyalty card usage at 74 Noodles & Company restaurants. Annual Sales Growth (%) and Loyalty Card Usage (% of Net Sales)(n = 74 restaurants) Store Growth% Loyalty% Store Growth% Loyalty% 1 -8.3 2.1 38 7.1 1.6 2 -4.0 2.5 39 7.4 1.8 3 -3.9 1.7 40 7.7 2.2 4 -3.4 2.1 41 7.9 2.2 5 -3.3 2.5 42 8.1 2.8 6 -1.9 3.0 43 8.3 2.4 7 -0.8 2.3 44 8.5 3.1 8 -0.4 2.3 45 8.6 2.2 9 -0.2 2.2 46 8.7 1.3 10 -0.2 2.3 47 8.8 1.8 11 0.5 2.1 48 8.8 2.5 12 0.6 2.5 49 8.9 1.9 13 0.8 2.0 50 9.1 2.0 14 1.9 2.0 51 9.5 2.4 15 2.0 2.0 52 10.2 2.2 16…
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 18.75% 12.75% 22.50% 31.50% 9.75% Given the preceding data, the average realized return on CCC’s stock is . The preceding data series represents of CCC’s historical returns. Based on this conclusion, the standard deviation of CCC’s historical returns is . If investors expect the…
Corn crop yields vary by state. In 2008, IOWA averaged 172 bushels/acre. On September 3, 2009, the published market price per bushel was 319.25 cents/bushel. Jimmy Harold is analying a heavily leveraged purchase of some additional acreage, and his decision to purchase is based on the expected yield during his first crop year. After analyzing historical rainfall and long range weather forecasts, Jimmy compiled the following table of crop yields. rainfail yield(bu/acre) probability below average 154 0.15 average 172 0.4 above average 177 0.45 What is the expected corn crop yield, E[Y] based on the data in Jimmy's? E[Y] = (to 2 decimal places).
Suppose that you are a researcher and wish to construct a linear mathematical (statistical) model that relates the number of years and the corresponding exports (million U.S.$) of a country. The constructed model may use to forecasts the future values. You have obtained the relevant data for the during of 1990 to 1995 and you have listed the data in Table 5. Table 5. Shows the list of the amount that have earned on exports Year No. 1 2 3 4 5 6 Exports 4954 6131 6904 6813 6803 8137 (a) Construct a suitable graph that explains the relationship between the number of years and the corresponding exports. (b) Construct a mathematical (Statistical) model by using least square method between number of years and the corresponding sales. (c) Interpret the slope of the estimated linear model (d) Forecast the value of exports by using the estimated linear model for the year of 2000
If a manager adopted both project A and project B simultaneously, the variance in returns associated with this joint project would be: Project Boom (25%) A B 18.75. 75. 30. 500. $30 -$15 Recession (75%) -$15 $20
The ABC Company is involved in the production and selling of consumer goods, particularly beauty products such as bath soap and shampoo and had registered a positive profit growth for the last 10 years. However, the current year seems to be different from those years as the company is expecting a decline in profit; which is estimated to be about 70% below the target. The manager now is in a dilemma … asking himself/herself “What happened, why this decline in profit?” The Manager then asked the company Accountant to give him/her the data on sales and advertising cost for the last 10 years – he/she wants these data to determine whether the company can live without advertising, as advertising cost happens to be substantial. Justify your answer by doing as step-by-step procedure in Correlation Analysis using a 0.05 level of significance. The data are as follows –
Many investors and financial analysts believe the Dow Jones Industrial Average (DJIA) gives a good barometer of the overall stock market. On January 31, 2006, 9 of the 30 stocks making up the DJIA increased in price (The Wall Street Journal, February 1, 2006). On the basis of this fact, a financial analyst claims we can assume that 30% of the stocks traded on the New York Stock Exchange (NYSE) went up the same day.A sample of 80 stocks traded on the NYSE that day showed that 11 went up.You are conducting a study to see if the proportion of stocks that went up is is significantly less than 0.3. You use a significance level of α=0.02α=0.02.What is the test statistic for this sample? (Report answer accurate to three decimal places.)test statistic = What is the p-value for this sample? (Report answer accurate to four decimal places.)p-value = The p-value is... less than (or equal to) αα greater than αα This test statistic leads to a decision to... reject the null accept the null fail…
6. Present the following data by a suitable diagram showing. The sales and net profits of a private company. Year Sales Net Profits 1998-1999 14% 49% 1999-2000 10% -25% 2000-2001 13% -1% es ehsinar wer lo
Discuss two extensions to the original GARCH (p,q) model and explain additional characteristics of financial data they might be able to capture.
An insurance company offers four different deductible levels-none, low, medium, and high-for its homeowner's policyholders and three different levels-low, medium, and high-for its automobile policyholders. The accompanying table gives proportions for the various categories of policyholders who have both types of insurance. For example, the proportion of individuals with both low homeowner's deductible and low auto deductible is 0.05 (5% of all such individuals). Auto L M H Homeowner's N L M H 0.04 0.05 0.05 0.02 0.07 0.12 0.20 0.10 0.02 0.03 0.15 0.15 Suppose an individual having both types of policies is randomly selected. (a) What is the probability that the individual has a medium auto deductible and a high homeowner's deductible? (b) What is the probability that the individual has a low auto deductible? A low homeowner's deductible? auto deductible homeowner's deductible (c) What is the probability that the individual is in the same category for both auto and homeowner's…
The idea of a large, stable middle class (defined as those with annual household incomes in 2010 between $39, 000 and $118, 000 for a family of three) is central to America’s sense of itself. The following table gives the percentage of middle-income adults in the United States from 1971 through 2011: Year 1971 1981 1991 2001 2011 Percent 61 59 56 54 51 A mathematical model giving the percentage of middle-class adults in the United States for the period under consideration is given by f(t) = −2.5t = 61.2 (0 ≤ t ≤ 4) where t is measured in decades, with t = 0 corresponding to 1971. (a) Plot the data points, and sketch the graph of f the function on the same set of axes.(b) What is the rate of change of the percentage of middle-income adults in the United States over the period from 1971 to 2011? (c) Assuming that the trend continues, what will the percentage of middle-income adults in the United States be in 2021?

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