Investment advisors recommend risk reduction through international diversification. International investing allows you to take advantage of the potential for growth in foreign economies, particularly in emerging markets. Janice Wong is considering investment in either Europe or Asia. She has studied these markets and believes that both markets will be influenced by the U.S. economy, which has a 16% chance for being good, a 47% chance for being fair, and a 37% chance for being poor. Probability distributions of the returns for these markets are given in the accompanying table. State of the U.S. Economy Returns in Europe Returns in Asia Good 15 % 25 % Fair 5 % 9 % Poor −10 % −10 % a. Find the expected value and the standard deviation of returns in Europe and Asia. (Round intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.)
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.
Investment advisors recommend risk reduction through international diversification. International investing allows you to take advantage of the potential for growth in foreign economies, particularly in emerging markets. Janice Wong is considering investment in either Europe or Asia. She has studied these markets and believes that both markets will be influenced by the U.S. economy, which has a 16% chance for being good, a 47% chance for being fair, and a 37% chance for being poor. Probability distributions of the returns for these markets are given in the accompanying table.
| State of the U.S. Economy | Returns in Europe | Returns in Asia | ||||
| Good | 15 | % | 25 | % | ||
| Fair | 5 | % | 9 | % | ||
| Poor | −10 | % | −10 | % | ||
a. Find the
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
