The Price of Oil Is Currently at $24 but You

question 29

Multiple Choice

The price of oil is currently at $24 but you expect it to either increase by 18 percent or decrease by 7 percent over the next 6 months.The 6-month risk-free rate of interest is 1.98 percent.What is the probability that the price will increase?

• A)32.47 percent
• B)36.03 percent
• C)38.06 percent
• D)35.92 percent
• E)37.94 percent

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Definitions:

Mean

The mean, often referred to as the average, is a statistic that represents the central or typical value in a set of data, calculated by dividing the sum of all values by the number of values.

Population Standard Error

A measure that estimates the variability of sample means around the population mean if multiple samples were taken from the population.

Confidence Interval

A band of values, yielded by analyzing sample data, which has a good chance of capturing the value of an unknown population variable.

Mean

The average value obtained by dividing the sum of all values in a set by the number of values.