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Author Question: How do the mean and standard deviation of the total amount that this investor earns in one year ... (Read 61 times)

mcmcdaniel

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on: Jun 24, 2018
How do the mean and standard deviation of the total amount that this investor earns in one year change as the 60,000 in cash available is reallocated for investment? Provide an intuitive explanation for the changes you observed here.
 
  What will be an ideal response?

Question 2

What is P(B  A )?
 
  What will be an ideal response?


GCabra

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Reply #1 on: Jun 24, 2018
Answer to Question 1

The mean total return in the fourth question is now higher than that in the second question and the standard deviation in the fourth question is also higher than that in the second question. Higher proportions of the available cash are now being invested in the stocks with higher mean annual rates of return and higher standard deviations of annual returns; that is, stocks B and D.

Answer to Question 2

P(B  A ) = P(B  A ) / P(A ) = 0.12 / 0.40 = 0.30


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