The prices of stocks or other financial instruments are often modeled with a lognormal distribution. An investor is considering purchasing stock in one of two companies, A or B. The price of a share of stock today is $1 for both companies. For company A, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.05 and σ = 0.1. For company B, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.02 and σ = 0.2. a) Find the mean of the price of one share of company A one year from now. b) Find the probability that the price of one share of company A one year from now will be greater than $1.20. c) Find the mean of the price of one share of company B one year from now. d) Find the probability that the price of one share of company B one year from now will be greater than $1.20.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
The prices of stocks or other financial instruments are often modeled with a lognormal distribution. An investor is considering purchasing stock in one of two companies, A or B. The price of a share of stock today is $1 for both companies. For company A, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.05 and σ = 0.1. For company B, the value of the stock one year from now is modeled as lognormal with parameters μ = 0.02 and σ = 0.2. a) Find the mean of the price of one share of company A one year from now. b) Find the
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