Simplified stock market Suppose there are three kinds of days: GOOD, GREAT, and ROTTEN. The following table gives the frequency of each of these types of days and the effect on the price of a certain stock on that day. Type of Day | Frequencey | Change in value --------------------------------------------- GOOD | 60 % | +2 GREAT | 10 % | +5 ROTTEN | 30 % | -4 The type of a given day is independent of the type of any other day. Let X be the random variable giving the change in value of the stock after 1 day.
1.
Simplified stock market
Suppose there are three kinds of days: GOOD, GREAT, and ROTTEN. The following table gives the frequency of each of these types of days and the effect on the price of a certain stock on that day.
Type of Day | Frequencey | Change in value
---------------------------------------------
GOOD | 60 % | +2
GREAT | 10 % | +5
ROTTEN | 30 % | -4
The type of a given day is independent of the type of any other day. Let X be the random variable giving the change in value of the stock after 1 day.
a. What is the expected change in the stock price? (That is, find E(X))
b. Calculate Var(X).
Note: Give your answer in decimal form, round to the nearest hundredths place.
Consider the provided data:
| Type of Day | Frequency | Change in Value |
| Good | 60% | +2 |
| Great | 10% | +5 |
| Rotten | 30% | -4 |
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