23.5 In Problem 23.13, in the absence of government interference, there is a constant marginal cost of $5 per ounce for growing marijuana and delivering it to buyers. If the probability that any shipment of marijuana is seized is 0.20 and the fine if a shipper is caught is $20 per ounce, then the equilibrium price of marijuana per ounce is (a) $11.25. (b) $9. (c) $25. (d) $4. (e) $6.
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- Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project. Amounts are in millions of dollars. State of Nature Decision Alternative Strong Demand S1 Weak Demand S2 Small complex, d1 9 8 Medium complex, d2 13 3 Large complex, d3 19 -9 Suppose PDC is optimistic about the potential for the luxury high-rise condominium complex and that this optimism leads to an initial subjective probability assessment of 0.8 that demand will be strong (S1) and a corresponding probability of 0.2 that demand will be weak (S2). Assume the decision alternative to build the large condominium complex was found to be optimal using the expected value approach. Also, a sensitivity analysis was conducted for the payoffs associated with this decision alternative. It was found that the large complex remained optimal as long as the payoff for the strong demand was greater than or equal to $16 million and as long as the payoff for the weak demand was greater…Calculate the PRESS statistic for the model developed from the estimation data in Problem 11.2. How well is the model likely to predict? Compare this indication of predictive performance with the actual performance observed in Problem 11.2.Question 2 Ignore the term "maximum likelihood"
- Question 17 Suppose Carole has a total wealth of $100,000 and a utility described by U = E -A She has a risk aversion coefficient of A-1. She can borrow and lend/invest at the risk-free rate of 2.8%. Suppose the optimal risky portfolio has an expected return of 12% and a standard deviation of 27.5%, What is her optimal amount to borrow or lend/invest at the risk free rate? Indicate investing/lending as a positive number and borrowing as a negative number. Round to the nearest cent ($0.01). Your answer should not include the $ sign. If your answer is $25.34, it should be written as 25.34. Question 18 Ayear ago, an investor bought 200 shares of a "no-load" mutual fund at $10.01 per share. No-load funds do not change "entry fees or "exit" fees when buying or redeeming shares. Sometime during the year, the fund paid dividends of $0.71 per share and the fund paid capital gains of $0.14 per share - and these payments were reinvested in the fund at an average price of $10.73 per share…D & R A1 10 - 3 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. Compute the minimum-variance hedge ratio.D & R A1 10 - 7 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. What is the correlation of the change in the spot and futures cocoa price?
- George Kyparisis owns a company that manufactures sailboats. Actual demand for George's sailboats during each of the past four seasons was as follows: Season 1 2 3 4Winter 1,400 1,240 1,080 920Spring 1,520 1,420 1,640 1,540Summer 1,000 2,140 2,040 1,960Fall 600 750 650 520 George has forecasted that annual demand for his sailboats in year 5 will equal 6,500 sailboats. Based on the given data and using the multiplicative seasonal model, the demand level for George's sailboats in the spring of year 5 will be nothing sailboats (enter a whole number).Question 3 Consider a medieval Italian merchant who is a risk averse expected utility maximiser. Their wealth will be equal to y if their ship returns safely from Asia loaded with the finest silk. If the ship sinks, their income will be y − L. The chance of a safe return is 50%. Now suppose that there are two identical merchants, A and B, who are both risk averse expected utility maximisers with utility of income given by u(y) = ln y. The income of each merchant will be 8 if their own ship returns and 2 if it sinks. As previously, the probability of a safe return is 50% for each ship. However, with probability p ≤ 1/2 both ships will return safely. With the same probability p both will sink. Finally, with the remaining probability, only one ship will return safely. (iv) Compute the increase in the utility of each merchant that they could achieve from pooling their incomes (as a function of p). How does the benefit of pooling depend on the probability p? Explain intuitively why this…1. Referring to Scenario 13-11, which of the following is the correct interpretation for the slopecoefficient?a) For each decrease of 1 thousand downloads, the expected revenue is estimated to increase by $3.7297 thousands.b) For each increase of 1 thousand downloads, the expected revenue is estimated to increase by $3.7297 thousands.c) For each decrease of 1 thousand dollars in expected revenue, the expected number ofdownloads is estimated to increase by 3.7297 thousands.d) For each increase of 1 thousand dollars in expected revenue, the expected number ofdownloads is estimated to increase by 3.7297 thousands.ANSWER:2. Referring to Scenario 13-11, predict the revenue when the number of downloads is 30 thousands.ANSWER:3. Referring to Scenario 13-11, which of the following is the correct interpretation for the coefficient ofdetermination?a) 74.67% of the variation in revenue can be explained by the variation in the number ofdownloads.b) 75.54% of the variation in revenue can be…
- Problem 4-25 The Gorman Manufacturing Company must decide whether to manufacture a component part at its Milan, Michigan, plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of dollars): State of Nature Low Demand Medium Demand High Demand Decision Alternative s1 s2 s3 Manufacture, d1 -20 40 100 Purchase, d2 10 45 70 The state-of-nature probabilities are P(s1) = 0.35, P(s2) = 0.35, and P(s3) = 0.30. Use a decision tree to recommend a decision.Recommended decision: _____________(manufacture component or purchase component) Use EVPI to determine whether Gorman should attempt to obtain a better estimate of demand. _____________(yes or No) EVPI: $ ________________ (fill in the blank) A test market study of the potential demand for the product is expected to report either a favorable (F) or unfavorable (U) condition. The relevant…In general,_____% of the values in a data set lie at or below the 94th percential. _______% of the values in a data set lie at or above the 90th percentile... if a sample consists of 800 test scores,___ of them would be at or below 40th percential, if a sample consists of 800 test scores,____ of then would be at or above the 58th percentile.a) If the prevalence rate is 50%, the sensitivity is 85%, and the specificity is 90%, what will the PPV value be? b) What are possible slider values that will produce a PPV value of 1? c) What are possible slider valuse that will produce an NPV value of 1? d) If sensitivity and specificity remain constant while prevalence decreases, what effect does that have on the PPV? e) If prevalence and specificity remain constant while sensitivity increases, what effect does that have on the NPV?
