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Ddm Case Study

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Ddm Case Study
DDM CASE STUDY CHAPTER – 5 HAPPY BULLS AND WORRIED BEARS

* OVERVIEW OF THE CASE

* End run provides two schemes: 1. Worried bear 2. Happy Bulls * With EndRun’s Worried bear fund scheme you can earn 400% rate of return in times of recession. * With EndRun’s Happy Bulls fund scheme you can earn 12 times your initial investment in fast expanding booming economy.

* COVARIANCE The covariance measures the strength of relationship between two numerical random variable X and Y. * A positive covariance indicates positive relationship. * A negative covariance indicates negative relationship.

* Expected value is sum of two random variable. E(X+Y) = E(X) + E(Y) E(X) = (0.1)(-300)+(0.2)(-200)+(0.5)(100)+(0.2)(400) = 60 E(Y) = (0.1)(1200)+(0.2)(600)+(0.5)(-100)+(0.2)(-900) = 10 E(X+Y)= 60 + 10 = 70 * There is positive covariance between Happy bull and Worried Bears.

web case 1

* ANSWER – 1 There are some catches about the claims the website make for the rate of return, which are as follows:

* Happy Bulls: As per the expected value of analysis there is a probability of 0.1 that Happy Bulls is giving a rate of return of value 1200 for the fast expanding economy.

* Worried Bears: As per the expected value analysis, there is a probability of 0.2 that Worried Bear is giving a rate of return of Value (400) for an economy in recession.

web case 2

* ANSWER – 2 There are some subjective data that influence the rate-of-return analysis of these funds:

* As per the data analysis, the rate of return is sure on both the investment parties. But according to

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