Concept explainers
(a)
To Explain: that should she purchase the stock option yes or not.
(a)
Answer to Problem 20E
Yes
Explanation of Solution
Formula used:
Calculation:
Suppose X is the amount of gain.
Probability model is
Above 30 | Below 20 | Between 20-30 | |
X | 1000 | 0 | 200 |
P(X) | 0.2 | 0.3 | 0.5 |
Finding the
Since predicted value is more than price of the stock, she should buy the stock.
(b)
To find: the expectation to gain by her.
(b)
Answer to Problem 20E
$300
Explanation of Solution
Gain = Expected value − price of stock
= 300-200
=$300
(c)
To find: the standard deviation of her gain.
(c)
Answer to Problem 20E
$360.56
Explanation of Solution
Formula used:
Calculation:
Calculating the var(x)
The standard deviation is
Therefore, the standard deviation is $360.56.
Chapter 16 Solutions
Stats: Modeling the World Nasta Edition Grades 9-12
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