70.2K

Verified Solution

Link Copied!

Please provide the solution in R

QUESTION 3 Suppose that a share of stock is bought for R 100 and it is believed that the daily stock price either increases by R 1 or decreases by R 1 per share. The probability that the price increases is p = 0.55. 3.1 Write an algorithm for the simulation of the probability that the share price will reach R 120 before it reaches R 100. (4) 3.2 Now simulate the probability that the share price will reach R 120 before it reaches R 100. Use the following in this simulation: Generate the price increase or decrease on a day by using the function sample() Set the seed to 1937 Use 10000 trials (Hint: The exact probability is 0.1018311.) QUESTION 3 Suppose that a share of stock is bought for R 100 and it is believed that the daily stock price either increases by R 1 or decreases by R 1 per share. The probability that the price increases is p = 0.55. 3.1 Write an algorithm for the simulation of the probability that the share price will reach R 120 before it reaches R 100. (4) 3.2 Now simulate the probability that the share price will reach R 120 before it reaches R 100. Use the following in this simulation: Generate the price increase or decrease on a day by using the function sample() Set the seed to 1937 Use 10000 trials (Hint: The exact probability is 0.1018311.)

Answer & Explanation Solved by verified expert

See Answer