Find the mean and variance of my stocks one year form now Wi

Find the mean and variance of my stocks one year form now? (Will award pts)

Let X_i be the price (in dollars) of stock i one year from now. X₁ is a N(10, 225) and X₂ is N(15, 900). Today I buy three shares of stock 1 for $8/share and two shares of stock 2 for $14/share. Assume X₁, X₂ are independent random variables. i) Find the mean and variance of my stocks one year from now. ii) What is the probability that one year from now I will have earned at least 40% return on my investment?

Also, What is a Normal density function? What do the parameters represent?

What is a Binomial mass function? What do the parameters represent?

Solution

I) Mean and varaince of stock is 25,1125

II)P(X>=0.40)=P(X-25/33.54>=0.40-25/33.54)

P(Z>=-0.73)=0.77

Normal Density Function:f(x;?,?)=1/(??2?) e^(-1/2 {x-???}^2 )

The parameters represent mean and variance.

Binomial Mass Function: