Quant problem problem, price, between, continuous

toocfatoo

Price per barrel of crude oil five yrs from now will range between $75-$105, Assume a continuous uniform distribution, the probability price will be less than $180 five yrs from now is closet to :

A 5.6%
B. 16.7%
C. 44.4%

suyash1989

range in uniform distribution problems is always in the denominator. the question is typed wrong.

Penny-wenny

I think it is a typo, that question doesnt make sense, it is asking what is prob <$180, which would be 100% given that range.

chetan86

The minimum bound on the asset price is 0 cause prices cannot be negative. So we are trying to find the probability that the asset price would be between 0 and 180.

Now, the question states that the price would range from 75-105. What I found out was,

What is the proportion of the Oil Price range of 75-105 compared to the whole range of 0-180?

Finalnub

On the info you've given its 100%... you've defined the distribution to be between 75 and 105. I'm guessing there's a typo somewhere....

Just for anoyone looking though, if the disribution of oil price in 5 years was cont. uniform between 75 and 105, probability opf the price being less than 80 would be, the area under the curve between 80 and 75:


(80-75) / 105 - 75

=5/30

=16.67%

mnieman

It should say $80 and the answer is 16.7% range 30 80-75(lower bound) =5 5/30

kd26gioi

16.67%

I did (105-75)/(180-0)



Edited 1 time(s). Last edit at Thursday, June 4, 2009 at 04:26PM by kh.asif.

Londonrocks

I don't follow.

Continuous uniform distribution between 75-105?