CHAPTER – 5
HAPPY BULLS AND WORRIED BEARS
* OVERVIEW OF THE CASE
* End run provides two schemes:
1. Worried bear
2. Happy Bulls
* With EndRun’s Worried bear fund scheme you can earn 400% rate of return in times of recession.
* With EndRun’s Happy Bulls fund scheme you can earn 12 times your initial investment in fast expanding booming economy.
The covariance measures the strength of relationship between two numerical random variable X and Y.
* A positive covariance indicates positive relationship.
* A negative covariance indicates negative relationship.
* Expected value is sum of two random variable.
E(X+Y) = E(X) + E(Y)
E(X) = (0.1)(-300)+(0.2)(-200)+(0.5)(100)+(0.2)(400)
E(Y) = (0.1)(1200)+(0.2)(600)+(0.5)(-100)+(0.2)(-900)
E(X+Y)= 60 + 10 = 70
* There is positive covariance between Happy bull and Worried Bears.
web case 1
* ANSWER – 1
There are some catches about the claims the website make for the rate of return, which are as follows:
* Happy Bulls: As per the expected value of analysis there is a probability of 0.1 that Happy Bulls is giving a rate of return of value 1200 for the fast expanding economy.
* Worried Bears: As per the expected value analysis, there is a probability of 0.2 that Worried Bear is giving a rate of return of Value (400) for an economy in recession.
web case 2
* ANSWER – 2
There are some subjective data that influence the rate-of-return analysis of these funds:
* As per the data analysis, the rate of return is sure on both the investment parties. But according to...