Probability that our portfolio goes up for consecutive years

Assignment Help Basic Statistics

Reference no: EM131762309

Question: A random walk on Wall Street? The "random walk" theory of stock prices holds that price movements in disjoint time periods are independent of each other. Suppose that we record only whether the price is up or down each year, and that the probability that our portfolio rises in price in any one year is 0.65. (This probability is approximately correct for a portfolio containing equal dollar amounts of all common stocks listed on the New York Stock Exchange.)

(a) What is the probability that our portfolio goes up for three consecutive years?

(b) What is the probability that the portfolio's value moves in the same direction (either up or down) for three consecutive years?

Reference no: EM131762309

Questions Cloud

Probability that randomly selected athlete tests positive : Steroids A company has developed a drug test to detect steroid use by athletes. The test is accurate 95% of the time when an athlete has taken steroids.

How do i find the accumulated depreciation for problem : Use Accounts Payable for the Balance Due. How do I find the Accumulated Depreciation for this problem

Determine the event-getting a pizza with mushrooms : Mike's pizza You work at Mike's pizza shop. You have the following information about the 7 pizzas in the oven: 3 of the 7 have thick crust and 2 of the 3 thick.

What amount of interest should be capitalized to the project : Assuming that the asset is placed into service on October 1, what amount of interest should be capitalized to the project on June 30

Probability that our portfolio goes up for consecutive years : A random walk on Wall Street? The "random walk" theory of stock prices holds that price movements in disjoint time periods are independent of each other.

Important factors behind starbucks decline : FFor Starbucks transformation and renewal case study, what were the most important factors behind Starbucks decline in 2007 and 2008?

Analytical assignment - reflect on scenarios : Reflect on scenario(s) from your experience that relate to above, and Discuss in at least 400 words addressing the above issues / sub-topics within your short

Discuss a schedule of expected cash collections from sales : A schedule of expected cash collections from sales, by month and in total

Comment on the feasibility of option : Which of the options would you recommend to the firm if it can only pursue one option? In addition, comment on the feasibility of each option.

User Account

All Pages