# Exercise Solution 1.10

- Measured in USD 1000s, the portfolio’s value has a binomial distribution with parameters
*n*= 20 and*p*= 0.9. The general formula for the probability function of a binomial distribution is:[s1]

Applying this to our portfolio, we obtain:

[s2]

This is graphed in Exhibit s1.

Exhibit s1: The market value (measured in USD 1000s) of the bond portfolio has a binomial distribution with parameters 20 and 0.9. - The formula for the standard deviation of a binomial random variable
*X*with parameters*n*and*p*is:[s3]

Measured in USD 1000s, our portfolio’s market value is binomially distributed with parameters 20 and 0.9. Accordingly:

[s4]

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