The price of a share of a particular stock listed on the New York Stock Exchange

Question

The price of a share of a particular stock listed on the New York Stock Exchange is currently $41. The following probability distribution shows how the price per share is expected to change over a three-month period:

Set up intervals of random numbers that can be used to generate the change in stock price over a three-month period. If required, round your answers to two decimal places.

With the current price of $41 per share and the random numbers 0.9273, 0.2777, 0.8043 and 0.4241, simulate the price per share for the next four 3-month periods.

What is the ending simulated price per share?

$  

Stock Price Change ($) Probability -3 0.05 -2 0.20 -1 0.15 0 0.20 1 0.15 2 0.20 3 0.05

Explanation / Answer

Using the cumulative probability distribution, the intervals here would be obtained as:

This is the required intervals for random numbers generated.

Now using the given random numbers generated, we get the changes as:

Therefore the ending simulated price per share is $44.

Stock Price Change Probability Interval -3 0.05 0 but less than 0.05 -2 0.20 0.05 but less than 0.25 -1 0.15 0.25 but less than 0.40 0 0.20 0.40 but less than 0.60 1 0.15 0.60 but less than 0.75 2 0.20 0.75 but less than 0.95 3 0.05 0.95 but less than 1

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.