An investor is concerned with the market return for the coming year, where the market return is defined as the percentage gain (or loss, if negative) over the year. The investor believes there are five possible scenarios for the national economy in the coming year: rapid expansion, moderate expansion, no growth, moderate contraction, and serious contraction. Furthermore, she has used all of the information available to her to estimate that the market returns for these scenarios are, respectively, 23%, 18%, 15%, 9%, and 3%. That is, the possible returns vary from a high of 23% to a low of 3%. Also, she has assessed that the probabilities of these outcomes are 0.12, 0.40, 0.25, 0.15, and 0.08. Use this information to describe the probability distribution of the market return. Compute the following for the probability distribution of the market return for the coming year.: 1. Mean, 2. Variance, 3. Standard deviation Show your solutions.
An investor is concerned with the market return for the coming year, where the market return is defined as the percentage gain (or loss, if negative) over the year. The investor believes there are five possible scenarios for the national economy in the coming year: rapid expansion, moderate expansion, no growth, moderate contraction, and serious contraction. Furthermore, she has used all of the information available to her to estimate that the market returns for these scenarios are, respectively, 23%, 18%, 15%, 9%, and 3%. That is, the possible returns vary from a high of 23% to a low of 3%. Also, she has assessed that the probabilities of these outcomes are 0.12, 0.40, 0.25, 0.15, and 0.08. Use this information to describe the probability distribution of the market return. Compute the following for the probability distribution of the market return for the coming year.: 1. Mean, 2. Variance, 3. Standard deviation Show your solutions.
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter1: Functions
Section1.EA: Extended Application Using Extrapolation To Predict Life Expectancy
Problem 7EA
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Transcribed Image Text:An investor is concerned with the market return for the coming year, where the market
return is defined as the percentage gain (or loss, if negative) over the year. The investor believes
there are five possible scenarios for the national economy in the coming year: rapid expansion,
moderate expansion, no growth, moderate contraction, and serious contraction. Furthermore, she
has used all of the information available to her to estimate that the market returns for these
scenarios are, respectively, 23%, 18%, 15%, 9%, and 3%. That is, the possible returns vary from
a high of 23% to a low of 3%. Also, she has assessed that the probabilities of these outcomes are
0.12, 0.40, 0.25, 0.15, and 0.08. Use this information to describe the probability distribution of the
market return.
Compute the following for the probability distribution of the market return for the coming
year.:
1. Mean,
2. Variance,
3. Standard deviation
Show your solutions.
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