Find the mean and variance of my stocks one year form now? (Will award pts) Let

Question

Find the mean and variance of my stocks one year form now? (Will award pts)

Let Xi be the price (in dollars) of stock i one year from now. X1 is a N(10, 225) and X2 is N(15, 900). Today I buy three shares of stock 1 for $8/share and two shares of stock 2 for $14/share. Assume X1, X2 are independent random variables. i) Find the mean and variance of my stocks one year from now. ii) What is the probability that one year from now I will have earned at least 40% return on my investment?

Also, What is a Normal density function? What do the parameters represent?

What is a Binomial mass function? What do the parameters represent?

Explanation / Answer

I) Mean and varaince of stock is 25,1125

II)P(X>=0.40)=P(X-25/33.54>=0.40-25/33.54)

P(Z>=-0.73)=0.77

Normal Density Function:f(x;?,?)=1/(??2?) e^(-1/2 {x-???}^2 )

The parameters represent mean and variance.

Binomial Mass Function:

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