Part 2
Interpretation and Justification of Probability Distribution
The need to determine the stock that will generate positive income requires the application of Binomial Distribution as the most appropriate Discrete Probability Distribution method. The selected technique is relevant because the probability of stock performance should be computed based on fixed number of trials, independency of trials, and classifications, and consistent success in every trial. Founded on the calculations performed in this section, the following are the probability outcomes for the identified events:
Probability of 0 events occurring = 0.000797923
Probability of <5 events occurring = 0.237507779
Probability of ≥ 10 events occurring = 0.047961897
The results highlighted above indicate that the probability of positive performance of stock returns is high.
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Interpretation of the Results of Values of X Calculations
The results indicate that the values of X of 20% of the continuous data (stock prices) is 572.06, demonstrating that the average stock price for the 20% is about 572 for all the identified period. The findings for 10% of the data indicate the stock price as 557.84 for all the six companies, which correspond to the average stock price reported by during the period. Finally, the value of stock is 652.40 for the 95% of data that lies between two values of X. The finding confirms a higher stock price average from the data gathered during the period. Overall, the X values demonstrate strong performance of the companies over the selected financial period.
