homework 1 answers

homework 1 answers - Homework 1 Answers: Step 1: Assume r ~...

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Homework 1 Answers: Step 1: Assume r ~ ( 2 , σ μ ) Step 2: Use the stock prices to calculate the return rate for each of the stock. Calculate 2 , from the weighted average of the return rates. (See Excel for details) = 0.081% = 1.159% Step 3: Standardize the return rate to standard normal distribution: % 159 . 1 % 081 . 0 - = - = r r Z ~N(0,1) Step 4: From the standard normal distribution table, % 3 %) 1 . 2 ( % 3 %) 081 . 0 % 159 . 1 * 88 . 1 ( % 3 %) 159 . 1 * 88 . 1 % 081 . 0 (
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This note was uploaded on 04/16/2008 for the course ECN 3620 taught by Professor Gai during the Spring '08 term at Babson College.

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