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

Question

he price of a share of a particular stock listed on the New York Stock Exchange is currently $43. The following probability distribution shows how the price per share is expected to change over a three-month period:

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.

With the current price of $43 per share and the random numbers 0.7431, 0.7227, 0.6611 and 0.9647, simulate the price per share for the next four 3-month periods.

What is the ending simulated price per share?

$  

Stock Price Change ($) Probability -4 0.10 -3 0.05 -2 0.25 -1 0.20 0 0.05 1 0.30 2 0.05

Explanation / Answer

The ending simulated price per share = $48

Stock Price Change Probability Cumulative Probability Interval -4 0.10 0.10 .00 but less than 0.10 -3 0.05 0.15 0.10 but less than 0.15 -2 0.25 0.40 0.15 but less than 0.40 -1 0.20 0.60 0.40 but less than 0.60 0 0.05 0.65 0.60 but less than 0.65 1 0.30 0.95 0.65 but less than 0.95 2 0.05 1 0.95 but less than 1

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