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estion 1. Explain intuitively the following concepts. (a) First order Stochastic Dominance (b) Second order Stochastic Dominance d) You are offered the following two
estion 1. Explain intuitively the following concepts. (a) First order Stochastic Dominance (b) Second order Stochastic Dominance d) You are offered the following two investment opportunities. Apply the concepts of (a)~(c) and discuss which one is preferred. Investment 1 Investment 2 Payoff Probability Payoff Probability 2 1/4 1 1/3 +4 1/2 6 1/3 9 1/4 8 1/3 (10) 4. Answer the following: (5) a) (5) b) Differentiate between descriptive and inferential statistics with an example for each. State the Central Limit Theorem (CLT). The formal statement is the most important theorem of probability and concept of statistical inference. Why? Explain your answer using graphs to illustrate your point. Problem 6: Using the Cayley Hamilton Theorem, compute the state transition matrix e for the characteristic matrix, 0 1 0 A = 0 -4 3 -1 -2
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