Problem Set 1

B show that eya ex b and vary a2 varx c

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Unformatted text preview: y2=ax2+b, and the probability distribution is p(y1)=p1 and p(y2)=p2. b) Show that E[Y]=a E[X] +b and Var(Y) = a2 Var(X). c) Suppose that x1=0 and x2=1. Show that Var (X) ≤ E[X]. Question 2. Consider an investment opportunity that generates a profit (net of all investment costs) of either +1 dollar with probability ¾ or  1 dollar with probability ¼. a) What are the mean and the variance of the profit from the investm...
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