5. The price of a share of a particular stock listed on the New York Stock Excha

Question

5. The price of a share of a particular stock listed on the New York Stock Exchange is per share is currently $39. The following probability distribution shows how the price expected to change over a three-month period: Stock Price Change ($) Probability 0.05 0.10 0.25 0.20 0.20 0.10 0.10 Set up intervals of random numbers that can be used to generate the change in stock price over a three-month period. a. b. With the current price of $39 per share and the random numbers 0.1091, 0.9407, 0.1941, and 0.8083, simulate the price per share for the next four 3-month periods. What is the ending simulated price per sh are?

Explanation / Answer

after drawing uniform random numbers by rand()

you get the changes by =IF(0<RAND()<0.05,-2,IF(0.05<RAND()<0.15,-1,IF(0.15<RAND()<0.4,0,IF(0.4<RAND()<0.6,1,IF(0.6<RAND()<0.8,2,IF(0.8<RAND()<0.9,3,IF(0.9<RAND()<1,4,5)))))))

do it 100 times

here you are using the cumulative distributions to draw the changes in price

you get the changes and corrspoding changed price

then get the average by sum and dividing by a100

thanks

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