An investor is trying to decide between two funds, Fund A or Fund B. The investor consults an economist, who estimates that for either of the two funds the amount of money gained in any given month on a $1000 investment is normally distributed and that the gain or loss in any month can be independent of the gain or loss in any other month. The economist says that if the current economic climate remains, the monthly gains on $1000 in the two funds have expected values (means) and standard deviations given in the table below. Expected Value Standard Deviation Fund A 4 5 Fund B 4 18 (a) In any given month, what is the probability that fund A gains money? (b) What is the probability that Fund A gains money in exactly two of the next four months? (c) A different investor decides to invest $8000 in Fund A and $3000 in Fund B. Assuming that the amounts gained by the two funds are independent, what are the mean and the standard deviation of the amount gained by this investment in the first month?
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
An investor is trying to decide between two funds, Fund A or Fund B. The investor consults an economist, who estimates that for either of the two funds the amount of money gained in any given month on a $1000 investment is
| Expected Value | Standard Deviation | |
| Fund A |
4 |
5 |
| Fund B | 4 | 18 |
(a) In any given month, what is the
(b) What is the probability that Fund A gains money in exactly two of the next four months?
(c) A different investor decides to invest $8000 in Fund A and $3000 in Fund B. Assuming that the amounts gained by the two funds are independent, what are the mean and the standard deviation of the amount gained by this investment in the first month?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
