A Random Walk Process Consists of the Toss of a Fair

question 1

Multiple Choice

A random walk process consists of the toss of a fair coin at the end of each day. If the outcome is heads stock price increases by 1.25% and if the outcome is tails the stock price decreases by 0.75%. What is the drift of such a process?

• A) +1.25%
• B) -0.75%
• C) +0.25%
• D) None of the above

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Definitions:

Tangible

Physical items or properties that can be seen, touched, and measured, such as machinery, buildings, and land.

Variation

Variation is the difference or diversity in size, shape, quality, or form among individual elements or items within a population or a series of events.