424lab2_summer2011-1 - Eric Zivot Econ 424 Summer 2011...

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Eric Zivot Econ 424 Summer 2011 Problem Set #2 Working with Random Variables and Probability Distributions Due: Tuesday 7/5/11 at the beginning of class Readings My lecture notes on review of probability theory and random variables. A Beginner’s Guide to R, chapters 3-7. R Cookbook, chapters 8 (probability) and 10 (graphics) Ruppert, chapter 2 (Returns). Programs and Data probReview.xls (on class syllabus and homework pages) probReview.r (on class syllabus and homework pages) Stock_bond.csv (on Ruppert’s book website) Instructions In this lab you will become more familiar with random variables and probability distributions. Try to do all of the calculations and plots in R. You can also do everything in Excel too. You will find the examples in probReview.R and probReview.xls to be helpful for some of the exercises that follow. Exercises 1. Suppose X is a normally distributed random variable with mean 0.05 and variance (0.10) 2 . Compute the following Pr(X > 0.10) Pr(X < -0.10) Pr(-0.05 < X < 0.15) 1% quantile, q .01 5% quantile, q .05 95% quantile q .95 99% quantile, q .99 Hint : you can use the R functions pnorm and qnorm to answer these questions.
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424lab2_summer2011-1 - Eric Zivot Econ 424 Summer 2011...

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