homework_09

Homework_09 - MIT OpenCourseWare http/ocw.mit.edu 1.010 Uncertainty in Engineering Fall 2008 For information about citing these materials or our

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MIT OpenCourseWare http://ocw.mit.edu 1.010 Uncertainty in Engineering Fall 2008 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.
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" $ # % " $ # " $ # % ( * * ) + - - , $ # % " $ # " $ # % ) + + * , . . - " # $ $ $ % " # $ $ $ % " $ $ $ # % ( ) * * * + , - - - 1.010 Fall 2008 Homework Set #9 Due November 20, 2008 (in class) 1. Let X 1 and X 2 be the gains, in millions of dollars, from investing $1million in two different stocks. The objective of investing is of course to maximize gains with a minimum of uncertainty. Suppose that X 1 and X 2 have the following second moment characteristics: d /10 5.9 2 5.9 3.5 d /10 2.6 2 2 0 1 0.8 2 2.6 2.5 ~ 1 2 ~ X X A B result. (a) Which stock type would you prefer for investment? (b) As an alternative, consider investing $500k in stock 1 and $500k in stock 2. Would you consider this strategy more attractive? Give an intuitive explanation of your
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This note was uploaded on 11/29/2011 for the course CIVIL 1.00 taught by Professor Georgekocur during the Spring '05 term at MIT.

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Homework_09 - MIT OpenCourseWare http/ocw.mit.edu 1.010 Uncertainty in Engineering Fall 2008 For information about citing these materials or our

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