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# Stock Security Analysis

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For this module, try your own luck at short term trading, Go to E-Trade or another online brokerage and use some of your imaginary \$894,000 to buy some shares of a stock that you think will go up in the next day or so. If you invested the entire \$894,000 already - sell some of the securities at today's market price in order to have at least \$50,000 in cash to get into the 'day trading.' Sell the stock with which you 'played the day-trading game' by the end of the module and you may use the money left from this exercise to buy back the same securities you sold in order to obtain the money to play the day-trading game.

How much did you spend, including transaction fees?
How much did you gain or lose when you sold this stock? Take transaction fees or commissions charged by your broker into account. Add or subtract this from your \$894,000.
Based on your analysis and findings, what would you recommend to other day traders and investors? Would you suggest other investors to enter in the day trading market? Please explain your reasoning.

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#### Solution Preview

How much I spent on Dec 16:

\$45.56 x 19620 stocks = \$893,887.2
Transaction Fee = \$10
Total Spent = 893,887.2 + \$10= \$893,897.2

How much I sold the stock for on Dec 26
\$49.31 x 19620 stocks =\$967,462.2
Transaction Fee = \$10
Total Received = \$967,462.2- \$10 = \$967,452.2

Total Gain = ...

#### Solution Summary

200+ words give earnings from imaginary stock trading and recommends things for other entering investors.

\$2.19

## Distribution and Security Analysis

2. Security analysts are professionals who devote full time efforts to evaluating the investment worth of a narrow list of stocks. The following variables are of interest to security analysts. Which are discrete and which are continuous random variables?

a. the closing price of a particular stock on the New york stock exchange
b. the number of shares of a particular stock that are traded each business day.
c. the quarterly earnings of a particular firm
d. the percentage change in yearly earnings between 2008 and 2009 for a particular firm
e. the number of new products introduced per year by a firm
f. the time until a pharmaceutical company gains approval from the U.S. FDA to market a new drug

12. The random variable x has the following discrete probability distributions:

x 1 3 5 7 9
p(x) .1 .2 .4 .2 .1

a. list the values x may assume
b. what value of x is most probable
c. display the probability distribution as a graph
d. find P(x=7)
e. find P(x > or = 5)
f. find P(x>2)

14. Explain why each of the following is or is not a valid probability distribution for a discrete random variable x:

a. x 0 1 2 3
p(x) .1 .3 .3 .2

b. x -2 -1 0
p(x) .25 .50 .25

c. x 4 9 20
p(x) -.3 .4 .3

d. x 2 3 5 6
p(x) .15 .15 .45. 35.

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