Q: You now have $10,000, all of which is
You now have $10,000, all of which is invested in a sports team. Each year there is a 60% chance that the value of the team will increase by 60% and a 40% chance that the value of the team will decrea...
See AnswerQ: Suppose you have invested 25% of your portfolio in four different
Suppose you have invested 25% of your portfolio in four different stocks. The mean and standard deviation of the annual return on each stock are shown in the file P11_46.xlsx. The correlations between...
See AnswerQ: A ticket from Indianapolis to Orlando on Deleast Airlines sells for $
A ticket from Indianapolis to Orlando on Deleast Airlines sells for $150. The plane can hold 100 people. It costs Deleast $8000 to fly an empty plane. Each person on the plane incurs variable costs of...
See AnswerQ: Based on Marcus (1990). The Balboa mutual fund has beaten
Based on Marcus (1990). The Balboa mutual fund has beaten the Standard and Poor’s 500 during 11 of the last 13 years. People use this as an argument that you can beat the market. Here is another way t...
See AnswerQ: You have been asked to simulate the cash inflows to a toy
You have been asked to simulate the cash inflows to a toy company for the next year. Monthly sales are independent random variables. Mean sales for the months January through March and October through...
See AnswerQ: The gamma distribution was used to model the skewness to the right
The gamma distribution was used to model the skewness to the right of the lifetime distribution. Experiment to see whether the triangular distribution could have been used instead. Let its minimum val...
See AnswerQ: Consider a device that requires two batteries to function. If either
Consider a device that requires two batteries to function. If either of these batteries dies, the device will not work. Currently there are two new batteries in the device, and there are three extra n...
See AnswerQ: Consider a drill press containing three drill bits. The current policy
Consider a drill press containing three drill bits. The current policy (called individual replacement) is to replace a drill bit when it fails. The firm is considering changing to a block replacement...
See AnswerQ: Appliances Unlimited (AU) sells refrigerators. Any refrigerator that fails
Appliances Unlimited (AU) sells refrigerators. Any refrigerator that fails before it is three years old is replaced for free. Of all refrigerators, 2% fail during their first year of operation; 4% of...
See AnswerQ: The annual demand for Prizdol, a prescription drug manufactured and marketed
The annual demand for Prizdol, a prescription drug manufactured and marketed by the NuFeel Company, is normally distributed with mean 50,000 and standard deviation 12,000. Assume that demand during ea...
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