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I am in QM563 and the book and lectures are not fully answering the formulas needed to answer this questions Construct a spreadsheet simulation model that simulates change of the price per share over a three-month period 1000 times. What is the average stock price change over a three-month period? What is the standard deviation of the stock price change over a three-month period?

User PseudoDust
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Final answer:

The student's question relates to constructing a simulation model for stock price changes over three months and performing statistical analysis and hypothesis testing using the given data set. Statistical calculations and Monte Carlo simulations can be applied using a spreadsheet to find the average stock price change and standard deviation.

Step-by-step explanation:

The student is tasked with constructing a spreadsheet simulation model to simulate the change in stock price per share over three months. To provide insights into the average stock price and the standard deviation of the stock price change, one needs to apply statistical concepts in finance. This can be accomplished by using a Monte Carlo simulation technique in a spreadsheet, where random price changes based on the given average growth rate and standard deviation are modelled over each week and repeated 1000 times for three months (approximately 13 weeks).

To perform the hypothesis test mentioned, using the given stock price changes, we must first establish the null and alternative hypotheses:

  • Null Hypothesis (H0): The stock price grows at a rate of $5 per week.
  • Alternative Hypothesis (H1): The stock price grows at a rate different from $5 per week.

Next, we need to calculate the sample mean (X), the sample standard deviation (Sx), and the sample size (n) from the data provided. Once these calculations are made, we can use a t-test to find the p-value and draw conclusions based on the level of significance.

Regarding the other exercises, linear equations, probability distributions, and mathematical models applied in the context of stock market scenarios would be required to answer them. Model predictions, probability calculations, and various distribution analyses such as exponential and uniform distributions are central to these exercises.

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