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  3. Intro to Computational Finance with R

Exercise

Compute probabilities

In this lab you will become more familiar with random variables and probability distributions.

Suppose \(X\) is a normally distributed random variable with a mean \(0.05\) and a variance \((0.10)^{2}\). Start by computing some probabilities.

Probabilities for normally distributed random variables can be computed with the function pnorm(). For instance, if \(Z\) is a standard normal random variable, \(Pr(Z \leq 0.5)\) can be computed with pnorm(0.5). You can supply the mean and the standard deviation of the normal distribution via the arguments mean and sd, respectively.

Instructions

100 XP
  • Assign to mu_x the mean of \(X\).
  • Assign to sigma_x the standard deviation of \(X\).
  • Compute the following probabilities and print the result to the console:
    • Pr(X > 0.10)
    • Pr(X < -0.10)
    • Pr(-0.05 < X < 0.15)