Question
In: Economics
Discuss briefly the purpose of probability distributions and expected values with examples
Discuss briefly the purpose of probability distributions and expected values with examples
Solutions
Expert Solution
Probability distributions can actually enable you to identify the possibilities of a particular result which actually eats in the decision making process and it also helps you to understand what sort of deviation could be from your desired output by analysing the chance of gifting a particular range of output results on the whole. It is same with the case of expected values where it it aids in the decision making process where it actually tells about what would be your probable outcome under a particular condition so that you can actually take a decision whether to go for it or not.
For example- consider a case where there would be a probability distribution of a rain and you are a farmer and in this case based on the deviation of rainfall Sachin's there is a probability that there would be no rainfall and they would be likely probability that they would be higher rainfall you would understand that the deviation is more so that you actually choose crops that would grow at any case. Where it can also be seen that if the expected value of rainfall is to particular extent you would choose crops that get to grow in that particular weather on the whole
Rahul Sunny answered 1 year agoRelated Solutions
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(8%)
(21%)
0.2
6
0
0.4
10
24
0.2
24
30
0.1
36
49
Calculate the expected rate of return, rB, for Stock
B (rA = 12.80%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.87%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(14%)
(35%)
0.2
4
0
0.3
12
20
0.2
18
29
0.1
30
42
Calculate the expected rate of return, rB, for Stock
B (rA = 8.20%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 25.07%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(11%)
(27%)
0.2
3
0
0.3
11
21
0.2
22
27
0.1
40
41
A.Calculate the expected rate of return, rB, for
Stock B (rA = 10.10%.) Do not round intermediate
calculations. Round your answer to two decimal places.
%
B.Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 22.00%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(14%)
(29%)
0.2
3
0
0.4
13
23
0.2
24
27
0.1
35
37
Calculate the expected rate of return, rB, for Stock
B (rA = 12.70%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.47%.) Do not round
intermediate calculations. Round your...
Expected returns Stocks A and B have the following probability distributions of expected future returns: Probability...
Expected returns
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
-10%
-39%
0.2
6
0
0.3
11
21
0.2
20
27
0.1
36
44
Calculate the expected rate of return, rB, for Stock
B (rA = 10.10%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.59%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(10%)
(35%)
0.2
3
0
0.3
11
19
0.3
19
27
0.1
32
47
Calculate the expected rate of return, rB, for Stock
B (rA = 11.80%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 21.10%.) Do not round
intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(7%)
(26%)
0.2
5
0
0.3
10
24
0.3
22
28
0.1
33
40
Calculate the expected rate of return, rB, for Stock
B (rA = 13.20%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 18.62%.) Do not round
intermediate calculations. Round your...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.2
(7%)
(37%)
0.2
4
0
0.2
13
19
0.3
18
27
0.1
38
48
Calculate the expected rate of return, , for Stock B ( =
11.20%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.62%.) Do not round
intermediate calculations. Round your answer to...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.3
(15%)
(30%)
0.2
3
0
0.2
11
20
0.1
24
26
0.2
33
40
Calculate the expected rate of return, , for Stock B ( = 7.30%.)
Do not round intermediate calculations. Round your answer to two
decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 26.58%.) Do not round
intermediate calculations. Round your answer to...
Stocks A and B have the following probability distributions of expected future returns: Probability A B...
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(9
%)
(30
%)
0.2
6
0
0.5
12
22
0.1
21
26
0.1
32
47
Calculate the expected rate of return, , for Stock B
( = 11.60%.) Do not round intermediate calculations. Round your
answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 19.66%.) Do not round
intermediate calculations. Round your answer...
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