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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.

Solution Preview

2. Answer:

a. the closing price of a particular stock on the New york stock exchange
- discrete since there are only finite number of values

b. the number of shares of a particular stock that are traded each business day
- discrete since there are only finite number of values

c. the quarterly earnings of a particular firm
- discrete since there are only finite number of values

d. the percentage ...

Solution Summary

The solution discusses the distribution and security analysis.

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