20. Price changes of shares of Ralph Inc. have been recorded overthe past 100 da
ID: 2950631 • Letter: 2
Question
20. Price changes of shares of Ralph Inc. have been recorded overthe past 100 days. The frequency distribution is as follows:Price Change Probability
- 1/2 0.06
- 3/8 0.08
- 1/4 0.10
- 1/8 0.12
0 0.20
1/8 0.24
1/4 0.08
3/8 0.06
1/2 0.06
If the current price of Ralph stock is $30, use the followingcomputer generated random numbers for simulation:
Day RN
1 0.089298419
2 0.917799699
3 0.353414983
4 0.226025249
5 0.368686094
6 0.079393032
7 0.663184808
8 0.783597511
9 0.674174677
10 0.050971983
What is the stock price at the end of day 10?
a. $29.125
b. $29.750
c. $30.250
d. $32.000
e. None of the above
Explanation / Answer
A. First, we need to construct a CDF. X F(X) -1/2 0.06 -3/8 0.14 -1/4 0.24 -1/8 0.36 0 0.56 1/8 0.80 1/4 0.88 3/8 0.94 1/2 1.00 Now to apply the random numbers: Day Stock movement 1 -3/8 2 3/8 3 -1/8 4 -1/4 5 0 6 -3/8 7 1/8 8 1/8 9 1/8 10 -1/2 The stock price after 10 days is 29.125.
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