What is the difference between a discrete probability distribution and a continuous probability distribution?

Give your own example of each. What is the expected value, and what does it measure?

How is it computed for a discrete probability distribution?

19. Determine the probability​ distribution's missing value. The probability that a person will see​ 0, 1,​ 2, 3, or 4 students Start 2 By 6 Table 1st Row 1st Column x 2nd Column 0 3rd Column 1 4st Column 2 5st Column 3 6st Column 4 2nd Row 1st Column Upper P left parenthesis x right parenthesis 2nd Column 0.41 3rd Column 0.21 4st Column 0.19 5st Column 0.04 6st Column question mark EndTable A. 0.85 B. 0.15 C. minus0.77 D. 0.38

a)Suppose A and B are disjoint events where A has probability 0.5 and B has probability 0.4. The probability that A or B occurs is

B)

The expected return of a kind of stock is 12% with standard deviation 10%. The expected return of a kind of bond is 4% with standard deviation 2%. The covariance of the return of the stock and of the bond is -0.0016. What is the standard deviation of a portfolio of 20% invested in the stock and 80% invested in the bond.

What is the difference between a discrete probability distribution and a continuous probability distribution? Give your own example of each.

What is the expected value, and what does it measure?

How is it computed for a discrete probability distribution?

Determine whether the following are examples of theoretical probability, subjective probability, or relative frequency.

a) After taking the exam you believe there is a 90% chance that you passed.

b) Last month the bus was on time 70% of the time so you believe that there is a 70% chance that the bus will be on time today.

c) Your friend tells you her job interview went well and she believes there is a 75% chance that she will get the job.

d)The instructor selects one student at random to present a problem to the class. There are 20 students in the class so you believe you have a 5% chance of being selected.

Stocks A and B have the following probability distributions of expected future returns:

1. Calculate the expected rate of return, , for Stock B ( = 13.40%.) Do not round intermediate calculations. Round your answer to two decimal places.

   ___ %

2. Calculate the standard deviation of expected returns, σ_A, for Stock A (σ_B = 20.69%.) Do not round intermediate calculations. Round your answer to two decimal places.

   ___ %

   Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. ___

   Is it possible that most investors might regard Stock B as being less risky than Stock A?

   1. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   2. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.
   3. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
   5. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.

3. Assume the risk-free rate is 2.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.

   Stock A: ___

   Stock B: ___

   Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?

   1. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   2. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   3. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   5. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.

Stocks A and B have the following probability distributions of expected future returns:

1. Calculate the expected rate of return, , for Stock B ( = 9.40%.) Do not round intermediate calculations. Round your answer to two decimal places.
     %

2. Calculate the standard deviation of expected returns, σ_A, for Stock A (σ_B = 27.07%.) Do not round intermediate calculations. Round your answer to two decimal places.
     %

   Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

   Is it possible that most investors might regard Stock B as being less risky than Stock A?

   1. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   2. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.
   3. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
   5. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   
   
   

3. Assume the risk-free rate is 2.0%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to two decimal places.

   Stock A:

   Stock B:

   Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?

   1. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   2. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
   3. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   4. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
   5. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
   
   
   

Explain Probability Distribution of a single variable, Summary Measures of a Probability Distribution, Conditional Mean and Variance and Introduction to Simulation

What is the difference between a discrete
probability distribution and a continuous
probability distribution?
Give your own example of each. What is the
expected value, and what does it measure?
How is it computed for a discrete probability
distribution?