State the Requirements to Use the Poisson Distribution as an Approximation

question 48

Essay

State the requirements to use the Poisson distribution as an approximation to the binomial distribution, including the mean for the Poisson distribution as an approximation to the binomial.

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Definitions:

Stock Price

The current price at which a particular stock can be bought or sold in the market, influenced by supply and demand, company performance, and market sentiment.

Forecast Earnings

An estimate of a company's future earnings per share over a specific period, often used by analysts to project future financial performance.

ROE

Return on Equity, a measure of the profitability of a business in relation to the equity, calculated as net income divided by shareholder's equity.

Plowback

The reinvestment of earnings by a company back into its business, often for expansion or development; also known as retained earnings.