The following are probability distributions of possible future returns of Stocks A and B: Probability A B 0.1 0.2 0.4 0.2 0.1 -15 0 5 10 25 -20 10 20 30 50 Requirement: Compute the expected rate of return for each stock and standard dev of returns for each. Compute the coefficient of variation. Which stock is less risky? Why?

The following are probability distributions of possible future returns of Stocks A and B: Probability A B 0.1 0.2 0.4 0.2 0.1 -15 0 5 10 25 -20 10 20 30 50 Requirement: Compute the expected rate of return for each stock and standard dev of returns for each. Compute the coefficient of variation. Which stock is less risky? Why?

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

See similar textbooks

Similar questions

Neighborhood Insurance sells fire insurance policies to local homeowners. The premium is $150, the probability of a fire is 0.1%, and in the event of a fire, the insured damages (the payout on the policy) will be $140,000. g. What are the expected value and variance of your profit?
Which of the following statement best describes the random fluctuation? O a. The values of variables change in a regular order according to season O b. The values of variables change suddenly or unexpectedly O c. It is obtained by summing the seasonal factors O d. It represents periodic fluctuations that repeat within the business cycle
Find the variance of thefollowing probability distribution. X P(X) 1 0.30 2 0.15 3 0.05 4 0.25 5 0.25 A.1.73 B.1.61 C.2.60 D.1.27
The following represents the probability distribution for the daily demand of microcomputers at a local store. Demand Probability 0 .1 1 .2 2 .3 3 .2 4 .2 The expected daily demand is _____. a. 1.0 b. 2 c. 2.2 d. 4
For each of the following probability distributions, calculate the expected value and standard deviation:
You are given the following probability distribution for the returns on Security A and Security B: Probability 0.3 0.3 0.3 0.1 Return on Security A 37% 7% 20% -15% Return on Security B 13% 19% 26% -22% Assume you invest $4,000 in Security A and $6,000 in Security B. What are the expected return and standard deviation of your portfolio?
You buy a stock that has an annual expected return of 20% and a standard deviation of 25%. Last year, investors in the stock lost 32.5% of their money and the year before they gained 40%. What is the probability that the outcome on this stock will be better than -32.5%, but less than +40% this year? a 18.75% b. 52.50% c. 78.82% d. 22.97% e. 77.03%
11.8.3 The table shows claims and their probabilities for an insurance company. Use the table to answer parts a through c. Amount of claim (to the nearest $50,000) Probability $0 0.65 $50,000 0.23 $100,000 0.05 $150,000 0.04 $200,000 0.02 $250,000 0.01 a.Calculate the expected value. $_______
Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% a. Derive the expected returns and the standard deviation of returns for the two assetsabove.
Activity 1: Lockdown company sells annuities based on the annual payout on the probability distribution of the length of life of the participants in the plan. Suppose the probability distribution of the lifetimes of the participants is approximately a normal distribution with a mean of 68 years and a standard deviation of 3.5 years. a. What proportion of the plan recipients would receive payments beyond age 75? b. What proportion of the plan recipients would receive payments between the age of 32 and 75?. c. What proportion of the plan recipients would receive payments below the age of 65? d. What proportion of the plan recipients would receive payments between the age of 62 and 64? e. What proportion of the plan recipients would receive payments between the age of 70 and 74?
What type of distribution does Y follow? A. Exponential B. Poisson C. Uniform D. Binomial E. Bernoulli
Calculate the six values of joint probability (5th column) and present worth PW (last column) and fill in the below table assuming a first cost of $20,000 and 12% interest rate. Annual benefits Probability Life (years) Probability Joint probability $5,000 $8,000 $10,000 $5,000 $8,000 $10,000 PW 30% 6. 66.7% 60% 66.7% 10% 66.7% 30% 33.3% 60% 33.3% 10% 33.3% O6999