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Mathematics, 29.10.2019 07:31 4804174946

The long-term capital depreciation group owns a portfolio that has $20,000 in a fund holding us stocks, and $30,000 in a fund holding european stocks. the annual return on the us fund is (approximately) normally distributed with mean 10% and standard deviation 5%. the annual return on the european fund is (approximately) normally distributed with mean 1% and standard deviation 8%. the covariance between the two funds’ annual returns is 0.002. (a) compute the probability distribution of the value of the long-term capital depreciation group’s portfolio after one year. (b) what is the probability that the value of their portfolio at yearend is less than $50,000?

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