# Question: The business you started last year as only 5000 left

The business you started last year as only $5000 left in capital. A week from now you need to repay a $10,000 loan or you will go bankrupt. You see two possible ways to raise the money you need.

You can ask a large company to invest the $10,000, wooing them with the $5000 you have left. You guess your probability of success is 0.20. Or you could ask, in sequence, several small companies to each invest $2000, spending $1000 on each to woo them. You guess your probability of success is 0.20 for each appeal. Whatâ€™s the probability you will raise enough money to repay the loan, with each strategy? Which is the better strategy, to be bold with one large bet or to be cautious and use several smaller bets? With the bold strategy, the probability of success is simply 0.20. With the cautious strategy, we need to use simulation to find the probability of success.

a. Simulate the cautious strategy 10 times using the Random Numbers applet on the text CD or other software. Show the steps of the simulations and specify any assumptions.

b. Combining simulation results for all students in the class, estimate the probability of the cautious strategy being successful.

c. Which strategy would you choose? The bolder strategy or the cautious strategy? Explain.

You can ask a large company to invest the $10,000, wooing them with the $5000 you have left. You guess your probability of success is 0.20. Or you could ask, in sequence, several small companies to each invest $2000, spending $1000 on each to woo them. You guess your probability of success is 0.20 for each appeal. Whatâ€™s the probability you will raise enough money to repay the loan, with each strategy? Which is the better strategy, to be bold with one large bet or to be cautious and use several smaller bets? With the bold strategy, the probability of success is simply 0.20. With the cautious strategy, we need to use simulation to find the probability of success.

a. Simulate the cautious strategy 10 times using the Random Numbers applet on the text CD or other software. Show the steps of the simulations and specify any assumptions.

b. Combining simulation results for all students in the class, estimate the probability of the cautious strategy being successful.

c. Which strategy would you choose? The bolder strategy or the cautious strategy? Explain.

**View Solution:**## Answer to relevant Questions

Part of a student opinion poll at a university asks students what they think of the quality of the existing student union building on the campus. The possible responses were great, good, fair, and poor. Another part of the ...A couple plans on having three children. Suppose that the probability of any given child being female is 0.5, and also suppose that the genders of each child are independent events. a. Write out all outcomes in the sample ...A local downtown arts and crafts shop found from past observation that 20% of the people who enter the shop actually buy something. Three potential customers enter the shop. a. How many outcomes are possible for whether the ...According to an article in The New Yorker (March 12, 2007), the Department of Homeland Security in the United States is experimenting with installing devices for detecting radiation at bridges, tunnels, roadways, and ...For a family with two children, let A denote {first child is female}, let B denote (at least one child is female}, and let C denote {both children are female}. a. Show that P(C | A) = 1/2. b. Are A and C independent events? ...Post your question