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Question 5: The Normal Distribution Let Xi be the price of stock Si and X2 the price of stock S2 one year from now. Xi is normally distributed with N(15, 100) and X2 is normally distributed with N(20, 100) (a) What is the probability that the price of stock Si is less than or equal to $16 next year? (b) What is the probability that the price of stock S2 is greater than or equal to $18 next year? (c) Assume I buy 5 stocks Si and 10 stocks S What is the mean value of my portfolio and its variance one year from now? (d) Assume you still buy the same stocks from part (c) today at a price of $14 for Si and a price of $17 for S2. What is the probability that I have made a profit of greater than or equal to $10 from Sı? What is the probability I am losing $3 from S2 Answer:
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