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Question 10B

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1Question 10B Empty Question 10B Fri Aug 05, 2011 6:59 am

Admin


Admin

Company A - Expected Value

Question 10B CompAExpectedValue

Company A - Variance and Standard Deviation

Question 10B CompAVariance

Company B - Expected Value

Question 10B CompBExpectedValue

Company B - Variance and Standard Deviation

Question 10B CompBVariance
Correlation between the two companies.

Question 10B CompADifference

Question 10B CompBDifference

Question 10B ProductDifferences

Question 10B ProductDifferencesProb

Covariance is the sum of the (Difference * Probability) for each state:

Question 10B Covariance

Correlation Coefficient can then be caluclated by dividing the covaraince by the product of the standard deviation for Company A and standard deviation for Company B.

Question 10B Correlation1

Question 10B Correlation2



In summary there is a weak-to-strong positive correlation between expected value for Company A and expected value for company B.

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2Question 10B Empty Re: Question 10B Fri Aug 05, 2011 7:07 am

Admin


Admin

Things to look out for

1. The question asks for Expected Value. Therefore the number for "Return" represents a monetary value and NOT a percentage. So it would be wrong to change a return of 4 to 0.04 when calculating Expected Value.

2. You don't need to find an average by dividing by 6, an average is calculated by multiplying by probability.

3. I can't find anywhere in the notes where Covariance and Correlation Coefficient are calculated.

4. I can't find anywhere in the notes where point 1. is explained.

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3Question 10B Empty Re: Question 10B Mon Aug 08, 2011 11:51 pm

lele



but, the standard deviation is 18, not 18%..if you put % it should become 1800%. I knew that the s.d. is not in percentage..

4Question 10B Empty Re: Question 10B Tue Aug 09, 2011 12:37 am

Admin


Admin

I think I've made an error here. Standard Deviation is not a percentage. That would make more sense?

It was a % when I thought we had to find Expected Return, but we have to find Expected Value - which means Standard Deviation is not a %?

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5Question 10B Empty Re: Question 10B Tue Aug 09, 2011 12:59 am

lele



i think that we are calculating the variance with the expected value (in $), so the standard deviation should be in $..

6Question 10B Empty Re: Question 10B Tue Aug 09, 2011 1:18 am

Admin


Admin

ok. But I don't think that changes my working. Just means it is wrong for me to state the answer as a %, I should state it in $?

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7Question 10B Empty Re: Question 10B Tue Aug 09, 2011 1:23 am

lele



nono, it doesn't change anything Very Happy

8Question 10B Empty Re: Question 10B Tue Aug 09, 2011 1:26 am

Admin


Admin

Good find though. I appreciate it. Will make the change when I get home and make corrections to this thread.

Thanks again.

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9Question 10B Empty Re: Question 10B Tue Aug 09, 2011 5:41 am

Admin


Admin

This should now be corrected in this thread and also in the final for download. Thanks lele.

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