Question
Use Central Limit Theorem to solve this problem! You want to invest in 8 different companies in the stock market. Your plan is to invest
Use Central Limit Theorem to solve this problem!
You want to invest in 8 different companies in the stock market. Your plan is to invest $12000 in every company. Each company's stocks may rise with probability "p" and you will gross $50000 (for a net profit of $50000 - $12000 = $38000), and with probability of "1-p", the company will not trade at a price you want it to sell, making you have a net profit of -$12000. The companies are all independent.
Your parents agreed to loan you the money as long as the net return from these investments is (+) with at least 99% certainty. Find the condition on "p" needed to be satisfied to get your parents to borrow you the money.
Step by Step Solution
3.39 Rating (155 Votes )
There are 3 Steps involved in it
Step: 1
We can use the fact that the distribution is normal ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
A First Course In Probability
Authors: Sheldon Ross
9th Edition
978-9332519077, 9332519072
Students also viewed these Economics questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App