Let Xi be the price (in dollars) of stock i one year fromnow. X1 is N(15, 100) and X2 is N(20, 2025). Today I buythree shares of stock 1 for $12/share and two shares of stock2 for $17/share. Assume that X1 and X2 are independentrandom variables.a Find the mean and variance of the value of my stocksone year from now.b What is the probability that one year from now I willhave earned at least a 30% return on my investment?c If X1 and X2 were not independent, why would it bedifficult to answer parts (a) and (b)?
Let Xi be the price (in dollars) of stock i one year fromnow. X1 is N(15, 100) and X2 is N(20, 2025). Today I buythree shares of stock 1 for $12/share and two shares of stock2 for $17/share. Assume that X1 and X2 are independentrandom variables.a Find the mean and variance of the value of my stocksone year from now.b What is the probability that one year from now I willhave earned at least a 30% return on my investment?c If X1 and X2 were not independent, why would it bedifficult to answer parts (a) and (b)?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 37P
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Question
Let Xi be the price (in dollars) of stock i one year from
now. X1 is N(15, 100) and X2 is N(20, 2025). Today I buy
three shares of stock 1 for $12/share and two shares of stock
2 for $17/share. Assume that X1 and X2 are independent
random variables.
a Find the mean and variance of the value of my stocks
one year from now.
b What is the probability that one year from now I will
have earned at least a 30%
c If X1 and X2 were not independent, why would it be
difficult to answer parts (a) and (b)?
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