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(Solution Library) Suppose that Mr King has two stocks, A B. Let X and Y be random variables of possible percent returns (0%, 5%, 10%, and 15%) for each of

Question: Suppose that Mr King has two stocks, A & B. Let X and Y be random variables of possible percent returns (0%, 5%, 10%, and 15%) for each of these two stocks with a joint probability distribution given in the following table,

Y stock Return
X stock return 0% 5% 10% 15%
0% 0.0625 0.0625 0.0625 0.0625
5% 0.0625 0.0625 0.0625 0.0625
10% 0.0625 0.0625 0.0625 0.0625
15% 0.0625 0.0625 0.0625 0.0625
  1. Find marginal probabilities between each possible returns of X & Y.

b) Determine if X & Y are independent.

c) Find the means and variances for both X & Y.

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Deliverable: Word Document


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