An investor buys the stock of two companies, investing $10,000 in each. The stock of each company either goes up by 80% after a month (rising to $18,000) with probability  or drops by 60% (falling to...


An investor buys the stock of two companies, investing $10,000 in each. The stock of each company either goes up by 80% after a month (rising to $18,000) with probability
 or drops by 60% (falling to $4,000) with probability
. Assume that the changes in each are independent. Let the random variable
 denote the value of the amount invested after one month.


(a) Find the probability distribution of
.


(b) Find the mean value of
.


(c) Does the mean value represent the experience of the typical investor?



May 04, 2022
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