The price of a share of a particular stock listed on the New York Stock Exchange

Question

The price of a share of a particular stock listed on the New York Stock Exchange is currently 36 The following probability distribution shows how the price per share is expected to change over a three-month period; Stock Price Change(Probability 0.15 0.30 0.10 0.05 0.10 0.20 0.10 -3 -2 a. Set up intervals of random numbers that can be used to generate the change in stock price over a three-month period. If required, round your answers to two decimal places. Stock Price Change Probability Interval 0.15 0.30 0.10 0.05 0.10 0.20 0.10 but less than but less than but less than but less than but less than but less than but less than b. With the current price of S36 per share and the random numbers 0.3377, 0.3023, 0.5027 and 0.7359, simulate the price per share for the next four 3-month periods. Random Number Price Change Ending Price Per Share 0.3377 0.3023 0.5027 0.7359 What is the ending simulated price per share?

Explanation / Answer

a) The random numbers table

-3 0.15 5.4 less than 4.5

-2 0.30 10.4 less than 9.9

-1 0.10 3.5 less than 3.4

0 0.05 1.8 less than 1.75

1 0.1 3.7 less than 3.6

2 0.2 7.6 less than 7.4

3 0.1 3.9 less than 3.8

b)

Random numbers Price change ending price

0.3377 35 13.195

0.3023 35 10.58

0.5027 33 16.58

0.7359 38 27.96

c) The ending price simualted price per share is $68

(ends)

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