Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 16

The price of a share of a particular stock listed on the New York Stock Exchange is currently $39. The following probability distribution shows how the price per share is expected to change over a three-month period:

a. Construct a spreadsheet simulation model that computes the value of the stock price in 3 months, 6 months, 9 months, and 12 months under the assumption that the change in stock price over any 3-month period is independent of the change in stock price over any other 3-month period.
b. With the current price of $39 per share, simulate the price per share for the next four 3-month periods. What is the average stock price per share in 12 months What is the standard deviation of the stock price in 12 months c. Based on the model assumptions, what are the lowest and highest possible prices for this
stock in 12 months Based on your knowledge of the stock market, how valid do you think this is Propose an alternative to modeling how stock prices evolve over 3-month periods.