A company orders components from Japan for its game player. The prices for the items that it orders are in Japanese yen. When the products are delivered, it must convert dollars into yen to pay the Japanese producer. When its next order is delivered (and must be paid for), it believes that the exchange rate of dollars to yen will take on the following values with the shown probabilities.
(a) Draw the probability distribution of a random variable X that denotes the exchange rate on the day of the delivery. Describe the shape of this distribution.
(b) If the current exchange rate is 120 ¥/$, what is the probability that the exchange rate will be higher on the delivery date?
(c) What is the expected value of the exchange rate on the date of the delivery?
(d) If the company exchanges $100,000 on the delivery date, how many yen can it expect to receive?
(e) What is the expected value in dollars of ¥10,000 on the delivery date?

  • CreatedJuly 14, 2015
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