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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

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

Linear Algebra: A Modern Introduction
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter2: Systems Of Linear Equations
Section2.4: Applications
Problem 28EQ
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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
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
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