fee of $200.His payoff for the two stocks depends in part on what happens to the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
fee of $200.His payoff for the two stocks depends in part on what happens to the market as a whole. If the market goes up (as measured, say, by the Standard and Poor's 500 Index increasing 8% over the next 12 months), he can expect to earn $2100 from the high-risk stock and $1400 from the low- risk stock. Finally, if the stock market goes down (as indicated by the index decreasing by 3% or more), he will lose $800 with the high-risk stock but still gain $400 with the low-risk stock. (7 marks) a. Let p be the chance associated with the market moving up, conduct a sensitivity analysis over p to determine the regions over which each option is preferred b. If the decision maker believes that p=0.4 then what should be you answer based on your work in (a) which option is the best Up $2,100 P $1,900 Down-$800 High Risk Stock -$1,000 1-P Up $1,400 $1,200 P Down $400 $200 1-P Saving Account -$200 Low Risk Stock -$200 $500 fee of $200.His payoff for the two stocks depends in part on what happens to the market as a whole. If the market goes up (as measured, say, by the Standard and Poor's 500 Index increasing 8% over the next 12 months), he can expect to earn $2100 from the high-risk stock and $1400 from the low- risk stock. Finally, if the stock market goes down (as indicated by the index decreasing by 3% or more), he will lose $800 with the high-risk stock but still gain $400 with the low-risk stock. (7 marks) a. Let p be the chance associated with the market moving up, conduct a sensitivity analysis over p to determine the regions over which each option is preferred b. If the decision maker believes that p=0.4 then what should be you answer based on your work in (a) which option is the best Up $2,100 P $1,900 Down-$800 High Risk Stock -$1,000 1-P Up $1,400 $1,200 P Down $400 $200 1-P Saving Account -$200 Low Risk Stock -$200 $500
Expert Answer:
Related Book For
Posted Date:
Students also viewed these economics questions
-
The value of a home depends in part on how attractive other homes and yards in the neighborhood are. How do local zoning ordinances try to promote land uses that generate external benefits for...
-
On the appropriate diagram, show what happens to the market for pizza if the price of tomatoes rises. On a separate diagram, show what happens to the market for pizza if the price of hamburgers falls.
-
The drag on the hull of a ship depends in part on the height of the water waves produced by the hull. The potential energy associated with these waves therefore depends on the acceleration of...
-
Jontil Co. began the current period with a $14,000 balance in the Peter Jontil, Capital account. At the end of the period, the company's adjusted account balances include the following temporary...
-
Do income taxes paid by a foreign branch work to the detriment of the US parent company?
-
What category boasts the largest number of computer applications?
-
Find the critical value f0.05 for F7,20.
-
Beck Company set the following standard unit costs for its single product. Direct materials (26 Ibs. @ $4 per Ib.) . . . . . . . . . . . . . . . . $104.00 Direct labor (8 hrs. @ $8 per hr.) . . . . ....
-
Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is...
-
Orion Controls is a leading manufacturer of industrial valve systems, and Nathan Armstrong, head of Marketing, had been contacted by Andre Gide, EVP of Avion Chemical to place an order for 50 of...
-
A technique is set at 40 mAs, 200 cm SID using 10:1 grid and produces 200 mR Find the new intensity if 400 cm SID and table top are substituted 250 Ob, 50 Oo, 300
-
State the rule on integrity and objectivity.
-
Let $X$ and $Y$ be vector fields, let $\omega$ be a $r$-form, and let $\eta$ be an $s$-form. Show that the following properties of the interior product are true: (i) $i_{X} i_{Y} \omega=-i_{Y} i_{X}...
-
Discuss the role of thermal resistance between various junctions in a high-power transistor structure.
-
Define and describe the power derating curve for a transistor.
-
Examine if the following differential forms are closed, explaining why: (i) $A \in \Omega^{1}\left(\mathbb{R}^{2} \backslash\{0\} ight)$, defined as $$A=\frac{h c}{2 \pi e} \frac{x d y-y d...
-
Q2. The sand (Gs = 2.65) in a deep natural deposit has an effective angle of internal friction of 37 and a dry unit weight of 17 kN/m. Calculate the shear strength of the sand at a depth of 6 m below...
-
What are some of the various ways to implement an awareness program?
-
Comparing stocks and government bonds, which has more risk? Which pays a higher average return?
-
The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.
-
Farmer McDonald gives banjo lessons for $20 an hour. One day, he spends 10 hours planting $100 worth of seeds on his farm. What opportunity cost has he incurred? What cost would his accountant...
-
Consider, again, the quarterly growth series \(z_{t}\) of Problem 4. Obtain Bayesian estimation of a VAR(4) model. Write down the fitted model.
-
Consider four components of U.S. monthly industrial production index from January 1947 to December 2012 for 792 data points. The four components are durable consumer goods (IPDCONGD), nondurable...
-
Consider the monthly unemployment rates of the States of Illinois, Michigan, and Ohio of the United States from January 1976 to November 2009. The data were seasonally adjusted and are available from...
Study smarter with the SolutionInn App