Questions 1-4 are based on Table 1 below, which lists the annual return for a $1
ID: 3381599 • Letter: Q
Question
Questions 1-4 are based on Table 1 below, which lists the annual return for a $1,000 investment in stock X under four different economic conditions, with associated probabilities for each condition. The distribution in Table 1 is a probability distribution. discrete continuous discrete and continuous neither discrete nor continuous The probability for stock X to have an annual return less than $80 is 0.1 0.3 0.4 0.8 The probability for stock X to have a positive annual return is 0.1 0.3 0.7 0.9 The expected value of annual return for stock X is $55 62.5 $85 $100Explanation / Answer
1. OPTION A: Discrete
2.
P(X<80) = P(-100) + P(50) = 0.1 + 0.3 = 0.4 [ANSWER, C]
****************
3)
P(X>0) = P(50) + P(100) + P(200) = 0.3 + 0.4 +0.2 = 0.9 [ANSWER, D]
*******************
4.
Thus, E(x) = 85 [OPTION C]
x P(x) x P(x) -100 0.1 -10 50 0.3 15 100 0.4 40 200 0.2 40Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.