Probability of losing a certain amount of money to an investment?

[moonman239]

So, let's say that I plan to buy a stock for $100,000. The record minimum value of the stock is $50,000. The record maximum value is $120,000. The probability of losing money is 85%. My goal with the stock is to raise $5,000, no more no less. Not taking into account how frequently stocks from the same company are sold for that price, what is the probability of meeting this goal?

 

[EnumaElish]

My goal with the stock is to raise $5,000, no more no less. Not taking into account how frequently stocks from the same company are sold for that price, what is the probability of meeting this goal?

Assuming a continuous distribution, the probability of raising any exact amount is zero.

 

[Live2Learn]

My goal with the stock is to raise $5,000, no more no less.

Why would any rational investor worry that the stock price closed higher, especially since this stock is so risky?

Maybe you meant $5,000 or more no less. This would also satisfy the requirement that you don't specify an exact price which makes the probability zero. Use a range of prices and the problem will make more sense.

Another thing...stock prices are usually quoted in price per share. I doubt you meant that a share is worth $100,000. Maybe you should state that you plan to buy 10,000 shares at a price of $10 per share.

 

[magpies]

Not really enough info to go off

 

[Live2Learn]

Oh, I get it. You've given your broker instructions to sell as soon as the stock's value increases to a value that nets you 5,000 profit. This would be a time series where the stock price moves with each tic of the clock. Right? There should be a greater than zero probability that the stock reaches this price in time. Not sure how to calulate this probability. And why are the max / min values relavent? Does an 85% chance the stock will lose money mean that each tic of the clock there is a 0.85 probability the price will decrease and a 0.15 probability that it will increase? If so then by how much (1% maybe)? I guess if the price reaches zero then the game is over.