MATH 218 Study Guide - Midterm Guide: Vestment, Point Estimation, Test Statistic
Document Summary
May 4, 2006 of the initial investment plus any amount gained and minus any amount lost. A portfolio manager o ers two assets to potential investors. Half of the investors select asset a; the remaining investors select asset b. Asset a has three possible returns: 8%, with a probability of 1/4; 12%, with a probability of 1/2; 16%, with a probability of 1/4. B also has three possible returns: 8%, with a probability of. 1/3; 14%, with a probability of 1/3; 20%, with a probability of 1/3. (a) draw the appropriate probability tree. X, of stock a has the following probability distribution: x. P(x = x) 0. 17 0. 20 0. 26 0. 20 0. 17. For example, 10 represents a loss of 10% of the initial in- vestment, while 10 represents a gain of 10% of the initial in- vestment. After one year, jane"s invest- ment will be worth.
