Question I: Your stock analyst tells you that a stock will go to $40 with probability of 30%,

3. Answer both questions.

the stock will go to $50 with probability of 50% and will go to $60 with probability of 20%.

Find the mean (expected value) and variance for the stock price.

Question II: Your simple stock portfolio consists of stock X and stock Y.

80% of your portfolio is made up of stock X and 20% is made up of stock Y.

The mean price of the stock X is $30 and the mean price of stock Y is $50.

The variance of stock X is 20 and the variance of stock Y is 10.

The covariance between them is 8.

Find the mean (expected value) and variance for the total value of the portfolio.

4. The probability that anyone at your party makes it to the end of the party is 80%.

Due to the current situation, there are only 5 (instead of 100?) people at your party.

Assuming that the possibility that any one person makes it to the end of the party is independent of anyone else, then use the Binomial model to find the probability that exactly

x = 0, 1, 2, 3, 4, 5 people make it to the end of the party.

Solutions

Expert Solution

orchestra answered 2 years ago

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