Expected accumulated value for investment A: Expected accumulated value for investment B: nvestment A (independent identicaly distributed rate) Rate Probability -0.02 0.5 0.04 0.3 0.06 0.2 DATA DISPLAY YOUR ANSWERS HERE Rate Probability Variance of investment A: Investment B (same rate each year determined at time t=0) 0.015 0.25 Variance of investment B: 0.02 0.6 0.035 0.15 Initial Investment 10
Consider the following two 4-year investments, with same initial investment given in the spread-sheet:
Investment A: In each year, the annual effective rate of return (or rate, for short) is a discrete random variable. The rates in each year are independent and identically distributed, and their
Investment B: In year 1, the annual effective rate of return (or rate, for short) is a discrete random variable. The probability distribution of the rate is given in the spreadsheet. Once the rate is chosen for the first year, it stays fixed for the next years.
Calculate the
State the expected accumulated value and variance for each investment.
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