Bhola Bhikhu is thinking about adding a new stock to her portfolio. Based on advice from...

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Bhola Bhikhu is thinking about adding a new stock to herportfolio. Based on advice from a friend who claimed to make a lotof money, she decides to use the price to earnings ratio (P/E) asthe only measurement of the performance of a stock. Bhola selectsseveral possible stocks based on this measurement and will selectone stock from the bundle. She assigns each of the selected stocksan equal chance of being selected. Stock one has a price toearnings ratio of 20, Stock two has an P/E of 22, Stock three has aP/E of 20, Stock four has a P/E of 18, and Stock five has a P/E of16, and Stock six has a P/E of 20. Let ? denote the random variablerepresenting the price to earnings ratio for the selectedstock.
a) Create a PMF table for the random variable ?.
b) What is the probability that Bhola selects a stock with a P/Egreater than 17?
c) Given that Bhola selects a stock with a P/E of at least 19,what is the probability that the P/E is over 20?
d) Given that Bhola selects a stock with a P/E greater than 17,what is the probability that the P/E is at most 22?
e) Find the expected value of ? and standard deviation of ï¿½

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3.9 Ratings (390 Votes)

aThere are total 6 stocks with PE values 20 22 20 18 1620Since each of the selected stocks an equal chance of beingselected the PMF table for the random See Answer

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