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The Lognormal Distribution
If ln(X) is a normally distributed random variable, then X is said to be a lognormal variable.
If P1, P2, P3, ... are the prices of a scrip in periods 1, 2, 3, ..., some applications in finance require ln (P2/P1), ln (P3/P2),... to be normally distributed, that is, continuously compounded returns are required to be normal. This property is described as “Stock Prices are Lognormal”.
REMARK
The previous random variables arose out of natural experiments. The following distributions are derived distributions. That is, it is a function of other distributions. We require the following two distributions in Testing of Hypothesis. and our presentation will be restricted by our requirements.
A local pizza shop sells large pies for $7 each. If the cost of the order is proportional to the number of pizzas would they charge a delivery charge per pizza or per order ?
The horizontal asymptote of (16x+7)(x^2-5)/(x^2+36).
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A farmer grows apples on her 600 acre farm and must cope with occasional infestations of worms. If she refrains from using pesticides, she can get a premium for "organically grown"
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Caterer verifies that 87% of people who sampled the food thought it was delicious. A random sample of 144 out of population of 5000 taken. The 144 are asked to sample the food. If
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