ECON 221/2 – Sections A, B, and BB Question 3
Question # 00112611
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Updated on: 10/05/2015 01:49 AM Due on: 10/14/2015
Your uncle has asked you to analyze his stock portfolio, which contains 6 shares of stock A and 8 shares of stock B. The joint probability distribution of the stock prices is shown below: (25 points)
- Find the probability that the price of stock A will be $40 while the price of stock B is $55. (3 points)
- Find the probability that either of the two stock prices will be at their maximum price level. (3 points)
- Find the average price and variance of stock B. (3 points)
- Find the average price and variance of stock A. (3 points)
- Can you tell which of the two stocks offers the greatest potential for capital gains? (2 points)
- Find the average value of the entire portfolio. (3 points)
- Find the covariance and correlation coefficient of the prices of the two stocks. (4 points)
- Find the standard deviation of the value of the entire portfolio. (4 points)
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Solution: ECON 221/2 – Sections A, B, and BB Question 3 Solution