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Technology Stocks : Silicon Valley Group
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To: LLCF who wrote (799)8/14/1997 8:17:00 PM
From: A.J. Mullen   of 2946
 
David, I think this is what you mean:

Stock value = 33
33= (prob success) x (value of success) + (prob fail) x (value at fail)

If p= prob of success, 60 the value of success, and 20 that of failure
then,

33 = p60 +(1-p)20
13 = p(60-20)
13/40 = p = 0.33

0.33 = the market's estimate of probability of success IF 60 and 20 are the values the market ascribes to success and failure.
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