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CHAPTER 2-2 Exercise 2.12 An investment consultant believes that the probability distribution of the return on...

CHAPTER 2-2

Exercise 2.12

An investment consultant believes that the probability distribution of the return on investment (in percent per year) on a certain international portfolio is as given in Table 2.26.

TABLE 2.26 Probability distribution of the return on investment of the international portfolio.

Return on Investment (% per year)

Probability

xi

pi

9

0.07

10

0.15

11

0.23

12

0.25

13

0.15

14

0.12

15

0.03

(a) Verify that the numbers in Table 2.26 correspond to a proper probability distribution.

(b) According to this consultant, what is the probability that the portfolio's return on investment will be at least 12%?

(c) According to this consultant, what is the expected return on investment of the portfolio?
Math   Statistics-And-Probability   
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