Answered: Let Xi be the price (in dollars) of…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Let Xi be the price (in dollars) of stock i one year from
now. X1 is N(15, 100) and X2 is N(20, 2025). Today I buy
three shares of stock 1 for $12/share and two shares of stock
2 for $17/share. Assume that X1 and X2 are independent
random variables.
a Find the mean and variance of the value of my stocks
one year from now.
b What is the probability that one year from now I will
have earned at least a 30% return on my investment?
c If X1 and X2 were not independent, why would it be
difficult to answer parts (a) and (b)?

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