Week 3 Quiz

1. A person who is 55 year old bought a PHP 2,000,000 life insurance policy at a cost of PHP 1.2 M and has a probability of 0.978 of living to age 56, find the expectation of the policy. 2. nPn-r = ? (Permutations)

Annual savings due to an energy efficiency project have a most likely value of $30,000. The high estimate of $40,000 has a probability of .25, and the low estimate of $20,000 has a probability of .35. (a) What is the expected value for the annual savings? (b) What types of tax incentives are available to firms for green projects?

The Kwik Klean car wash loses $250 on rainy days and gains $1200 on non rainy days.  If the probability of rain is 0.13, what is the expected net profit?

Question 2An investor is to purchase one of three types of real estate, as illustrated inFigure below. The investor must decide among an apartment building, anoffice building, and a warehouse. The future states of nature that willdetermine how much profit the investor will make are good economicconditions and poor economic conditions. The profits that will result fromeach decision in the event of each state of nature are shown in Table below: Assume that it is now possible to estimate a probability of 0.60 that goodeconomic conditions will exist and a probability of .40 that poor economicconditions will exist. a) Determine the best decision by using expected opportunity loss. b) Develop a decision tree, with expected values at the probability nodes. c) Compute the expected value of perfect information.

I am in possession of two coins. One is fair so that it lands heads (H) and tails (T)with equal probability while the other coin is weighted so that it always lands H. Bothcoins are magical: if either is flipped and lands H then a $1 bill appears in your wallet,but when it lands T nothing happens. You may only flip a coin once per period. Theinterest rate is i per period. You are risk-neutral and thus only concern yourself withexpected values (and not variance). For simplicity, in the questions below assumeyou will live forever.1. How much are you willing to pay for such a coin that you know is fair? 2. How much are you willing to pay for such a coin that you know is weighted? 3. I currently own the coins and know which is fair and which is weighted, but youcannot tell which is which. You may make an offer to purchase a coin of yourchoosing, which I am free to accept or reject. What is the most you are willingto offer? Explain how you arrived at this answer.

Annual savings due to an energy efficiency project have a most likely value of $30,000.The high estimate of $40,000 has a probability of 0.2, and the low estimate of $20,000has a probability of 0.30. What is the expected value for the annual savings?

A new product’s sales and profits are uncertain. The marketing department has predicted that sales might be as high as 9000 units per year with a probability of 15%. The most likely value is 6000 units annually. The pessimistic value is estimated to be 3500 units annually with a probability of 25%. Manufacturing and marketing together have estimated the most likely unit profit to be $33. The pessimistic value of $26 has a probability of 0.25, and the optimistic value of $37 has a probability of 0.3. Construct the probability distributions for sales and unit profits.

The shipping costs for fresh fruit items have been estimated and assigned the probabilities shown below. The expected value of the shipping costs is closest to: (a) $36.33 (b) $39.21 (c) $41.28 (d) $45.11 Shipping Cost, $ 34 38 55 Probability 0.22 0.31 0.47

The weekly salary paid to employees of a small company that supplies part-time laborers averages s800 with a standard deviation of $500. (a) If the weekly salaries are normally distributed, estimate the fraction of employees that make more than $300 per week. (b) If every employee receives a year-end bonus that adds $100 to the paycheck in the final week, how does this change the normal model for that week? (c) If every employee receives a 5% salary increase for the next year, how does the normal model change? (d) If the lowest salary is $300 and the meltian salary is $550, does a normal model appear appropriate?

a.  If the decision maker knows nothing about the probabilities of the fourstates of nature, what is the recommended decision using:i. the optimistic approachii. the conservative approachiii. the minimax regret approachiv. the Laplace method

The Enrico Oil Company is deciding whether to drill for oil on a tract. The company estimates thatthe project would cost $8 million today. The company estimates that once drilled, the oil willgenerate positive net cash flow of $4 million a year for the next 4 years. The company recognizes,however, that if it waits 2 years, it could cost $9 million, but there is a 90% chance that the nextcash flow will be $4.2 million and there is a 10% chance that the net cash flow will be $2.2 milliona year for 4 years. Assume that all cash flows are discounted at 10%. Required:i. If the company opts to drill today, what is the project’s NPV? ii. Evaluate whether it would be worthwhile to wait 2 years before deciding whether todrill?

12. Weighted average of probabilities is classified as A. average rate of return B. expected rate of return C. past rate of return D. weighted rate of return

The owner of a ski resort is considering installing a new ski lift that will cost $900,000. Expenses for operating andmaintaining the lift are estimated to be $1,500 per day when operating. The U.S. Weather Service estimates thatthere is a 60% probability of 80 days of skiing weather per year, a 30% probability of 100 days per year, and a 10% probability of 120 days per year. The operators of the resort estimate that during the first 80 days of adequate snow in a season, an average of 500 people will use the lift each day, at a fee of $10 each. If 20 additional days are available, the lift will be used by only 400 people per day during the extra period; and if 20 more days of skiing are available, only 300 people per day will use the lift during those days. The owners wish to recover any invested capital within five years and want at least a 25% per year rate of return before taxes. Based on a before-tax analysis, should the lift be installed?

For all parts of this question, assume that the log of GDP per capita is normally distributed with a mean of 8.7 and standard devistion of 1.5Step 1 of 4: If the log of the world distribution of income is normaly distributed with a mean of 8.7 and a standard deviation of 1.5, what income indollars) marks the 90th percentile? KeypadAnswer  A 71.325B 1.29C 41,253D 10.63

Your firm uses a continuous review system and operates52 weeks per year. One of the SKUs has the followingcharacteristics.Demand 1D2 = 20,000 units>yearOrdering cost 1S2 = $40>orderHolding cost 1H2 = $2>unit>yearLead time 1L2 = 2 weeksCycle@service level = 95 percentDemand is normally distributed, with a standard deviation ofweekly demand of 100 units.Current on-hand inventory is 1,040 units, with no scheduledreceipts and no backorders.a. Calculate the item’s EOQ. What is the average time, inweeks, between orders?b. Find the safety stock and reorder point that provide a95 percent cycle-service level c. For these policies, what are the annual costs of (i) holdingthe cycle inventory and (ii) placing orders?d. A withdrawal of 15 units just occurred. Is it time to reor-der? If so, how much should be ordered?

Given ten historical returns: [-15%, -13%, -10%, -5%, -3%, 1%, 4%, 7%, 11%, 20%], what is the 20% conditional value at risk (CVaR) under the empirical distribution?   Select one:   a. -15%   b. -14%   c. -13%   d. -10%   e. 11%

using 'standard Normal Table ' , calculate the following probabilities. 1. Pr(z < -1.12) 2. Pr(z >2.32) 3.pr(1.22 < z >2.53) 4.pr(-3.22 < z < 0.22) 5.pr(-2.36 < z < -0.50)

Get the following: a. Minimax regret b. Hurwicz (a = 0.4) c. Equal likelihood

Probability Possible Rate of Return 0.25 -0.10 0.15 0.00 0.35 0.10 0.25 0.25 a. Under what conditions can the standard deviation be used to measure the relative risk of two investments?  b. Under what conditions must the coefficient of variation (CoVar) be used to measure the relative risk of two investments?

The probabilities that the life of a machine will vary from 6 to 12 years are given in the table below. The expected life of the machine is ____________.   Life , Years        6          7          8          9          10        11        12 Probability        0.10     0.15     0.25     0.15     0.20     0.10     0.05

Question10: He game matrix table arranged in terms of player A is given. by solving the game with the graphic method; 2-)Find the probability of playing B's 1st strategy. 2-)Find the probability of playing B's 2nd strategy. 3-) find the expected game value.

A manufacturing firm is considering a project which has an economic service life of one year with no salvage value. The initial cost for the project is $2,500. There is a 0.18 probability that the year-end revenue is $2,280. There is a 0.62 probability that the year-end revenue is $3,910. There is a 0.2 probability that the year-end revenue is $4,730. If the firm's MARR is 14%, what is the variance of the project?

pls answet all 3

Build model The sales and profits for a new product  are uncertain.       The marketing department has predicted that sales might be            *) as high as 10,000 units per year with a probability of 10%.             *)  The most likely value is 7000 units annually.            *)  The pessimistic value is estimated to be 5000 units annually with a probability of 20%.        Manufacturing and marketing together have estimated the net profit as follows:            *) the most likely unit profit to be $32.             *) The pessimistic unit profit of $24 has a probability of 0.3, and            *) the optimistic unit profit of $38 has a probability of 0.2.           The company is planning for a 5 year horizon and uses 14% as their interest rate.            a) Construct the joint probability function, assuming that profit value and sales amount are independent.           b) Determine the PW of the profits for the pessimistic, most likely and optimistic scenarios.           c) Compute…

Suppose XYZ Corporation's stock price rises or falls with equal probability by $25 each month, starting where it ended the previous month. What is the value of a three month at the-money European call option on XYZ's stock if the stock is priced at $100 when the option is purchased?$______

53. The annual demand for Prizdol, a prescription drugmanufactured and marketed by the NuFeel Company,is normally distributed with mean 50,000 and standarddeviation 12,000. Assume that demand during each ofthe next 10 years is an independent random numberfrom this distribution. NuFeel needs to determine howlarge a Prizdol plant to build to maximize its expectedprofit over the next 10 years. If the company builds aplant that can produce x units of Prizdol per year, it willcost $16 for each of these x units. NuFeel will produceonly the amount demanded each year, and each unit ofPrizdol produced will sell for $3.70. Each unit of Prizdol produced incurs a variable production cost of $0.20.It costs $0.40 per year to operate a unit of capacity.a. Among the capacity levels of 30,000, 35,000,40,000, 45,000, 50,000, 55,000, and 60,000 unitsper year, which level maximizes expected profit?Use simulation to answer this question.b. Using the capacity from your answer to part a,NuFeel can be 95%…

A regional automobile dealership sent out fliers to perspective customers indicating that they had already won one of the three different prizes: automobile valued at $25,000, a $100 gas card, or a $5 Walmart shopping card. To claim his or her prize, a prospective customer needed to present the flier at the dealership’s showroom. The fine print on the back of the flier listed the probabilities of winning. The chance of winning the car was 1 out of 31,748, the chance of winning the gas card was 1 out of 31,748, and the chance of winning the shopping card was 31,746 out of 31,748.How many fliers the automobile dealership sent out? Please explain. Using your answer to above and the probabilities listed on the flyer, what is the expected value ofthe price won by a prospective customer receiving a flyer? Demonstrate all necessary steps. Using your answer to the first question and the probabilities listed on the flyer what is the standarddeviation of the value of the price one by the…

George has projections for the 3 alternative investments in equity shares (stock): What is the Standard Deviation in portfolio 2?

Can you explain what these two belows mean in regard of GMM and Maximum likelihood. What are we calculating and what is it used to Unconstrained optimizationConstrained optimizatio

GeoMart sells travelers notebooks. Annual demand for these notebooks follows a Normal distribution with an average of 2,100 units and a standard deviation of 850. GeoMart buys these notebooks from its manufacturer for $ 1.50 per notebook and sells them for $ 3. There is an order waiting period of 5 weeks, which elapses from when an order is placed to the manufacturer until it is delivered to GeoMart. The accounting department estimated that the process of placing an order costs $ 2 and recommends that it be apply a 22 percent annual interest to the material for reasons of ‘holding cost’. The cost of not complying with the demand is estimated at 40 cents per unit, in addition to the loss of income (‘profit loss’), both then represent the cost of “loss of good faith” or 'Loss-of-goodwill'. (Conversion: 7 days a week, 52 weeks in a year.) Under this scenario answer the following: a) Assume that you want to minimize costs and determine: the optimal order size, the reorder point, the…

If the PW of an investment is negative, then we will recommend the investment. True or False?

A company that manufactures and sells​ T-shirts for sporting​ events, is providing shirts for an upcoming tournament. Each shirt will cost ​$7 to produce and will be sold for $13. Any unsold shirts at the end of the tournament can be sold for $5 apiece in the near future. The company assumes the demand for the shirts will be 1,500​,3,000​,4,500​, or 6,000. The company also estimates that the probabilities of each of these sales levels occurring will be 20​%, 25​%,25​%, and 30​%, respectively. Determine the expected monetary value of the project if the company chooses to print 4,500 shirts for the tournament. The expected monetary value is---- ​(Type a whole​ number.)