Suppose an individual is able to invest in shares of Sultan plc, in shares of Ahmed plc or in a portfolio made up from Sultan plc and Ahmed plc. Event ( weather for season) Probability of event Pi Returns on Sultan plc Rs Returns on Ahmed plc RA Warm 0.2 20 -10 Average 0.6 15 22 Wet 0.2 10 44 Required: a- Calculate expected return and standard deviation of company Sultan and Ahmed? b- What are the covariance and the correlation coefficient between returns on Sultan plc and returns on Ahmed plc?
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.
Suppose an individual is able to invest in shares of Sultan plc, in shares of Ahmed plc or in a portfolio made up from Sultan plc and Ahmed plc.
|
|
Probability of event Pi |
Returns on Sultan plc Rs |
Returns on Ahmed plc RA |
|
Warm |
0.2 |
20 |
-10 |
|
Average |
0.6 |
15 |
22 |
|
Wet |
0.2 |
10 |
44 |
Required:
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