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...
-
Suppose life expectancy in years (L) is a function of two inputs, health expenditures (H) and nutrition expenditures (N) in hundreds of dollars per year. The production function is L = cH0.8N0.2. a)...
-
Why might even normal economic conditions pose channel management problems?
-
As the head of public health, you conduct a weekly census across age-groups of the number of cases of flu reported in your area. By hand, compute the mean and the median by week. Which do you think,...
-
I thought the Internet would be an ideal way to distribute our products. We've had a lot of success with our direct sales, but now we can reach a much larger audience. The baskets we make and sell...
-
The inventory for Target over last three years was 403 in 2022, (3249) in 2021, and (1661) in 2020 (United States Securities and Exchange Commission, 2023). Inventory uses LIFO method, states...
-
You are the contracting officer for a CPFF service contract for routine and emergency maintenance of testing equipment in the amount of $1,200,000. The contractor is not required to provide any...
-
Respond that the following statements are TRUE or FALSE: 1) Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals. 2)...
-
If a firm has 35% chance to be under recession getting -5% return, 40% chance to be at a normal state and get 9% and 25% chance to be growing getting 17% return, what is the expected return for this...
-
After her dentist commented on the damage her practice of vomiting had caused to her teeth, Hilda realized that she had a problem. After seeing her psychiatrist, Hilda was diagnosed with anorexia,...
-
Patterson Incorporated is a biotechnology firm that specializes in developing new drugs. It is all - equity financed and has 2 0 0 million shares currently trading at $ 2 5 per share. There are no...
-
Saleena was hired and agreed to a $48.50 per hour compensation, for a regular 44 hour work week. Calculate her net earnings for the year. (10 marks) Federal Tax Brackets In Canada 2022 Federal Tax...
-
In this Scenario, you are a CFO at a community Hospital where there has been a reduction in revenue reported over the last three months. You must determine where the source of this problem lies and...
-
A new video game has a variable cost of $0.50 per unit and a fixed cost of $6000. The cost, C, of selling g games can be written as: C(g)=0.50g+6000 How many games were sold when the cost is $7000 ?
-
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...
-
In a cluster sample, the population is divided into groups, and a random sample from each group is drawn. In Exercises 1316, determine whether the statement is true or false. If the statement is...
-
True or false: The way that questions are worded on a survey may have an effect on the responses.
-
In a case-control study, the outcome has occurred before the subjects are sampled. In Exercises 1116, determine whether the statement is true or false. If the statement is false, rewrite it as a true...
Study smarter with the SolutionInn App