1. Limited time only! Sign up for a free 30min personal tutor trial with Chegg Tutors
    Dismiss Notice
Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Homework Help: Probability of selling a stock higher than you bought it

  1. Aug 21, 2010 #1
    1. The problem statement, all variables and given/known data
    I buy a stock at Apple Inc. History shows that the average daily stock price is $297 with a variance of $5. If I buy a stock at $300, what is the probability that after 10 years I will be able to sell the stock at at least that price?


    2. Relevant equations



    3. The attempt at a solution

    I know of one way to solve this problem: Gaussian distribution. I know that I can calculate the probability of $300, $301, $302,...$n with a simple equation. I just want to know if there is another way of doing it.
     
  2. jcsd
  3. Aug 22, 2010 #2

    HallsofIvy

    User Avatar
    Science Advisor

    Yes, use Gaussian distribution. But why calcuate "$300, $301, $302, ..." separately? Any good table of the normal distribution will give you the probability that "x> 300" directly. What did you get for the "standard normal" variable for x= 300?

    (Since you are using the "historic" values, the "10 years" you owned the stock is irrelevant.)
     
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook