Problem

Many people believe that the daily change of price of a company’s stock on the stock marke...

Many people believe that the daily change of price of a company’s stock on the stock market is a random variable with mean 0 and variance σ2. That is, if Yn represents the price of the stock on the nth day, then

where X1, X2, ... ‘are independent and identically distributed random variables with mean 0 and variance σ2. Suppose that the stock’s price today is 100. If σ2 = 1, what can you say about the probability that the stock’s price will exceed 105 after 10 days?

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