FINANCIAL MARKET

Activity 1. Read and answer the problems. Problem 1. 3K Company is considering the introduction of a new product. The anticipated demand, probability of demand and profits for each are given below. Product X Product Y Product Probability of Profit Product Probability of Profit Demand Demand (Peso) Demand Demand (Peso) (units) %% 50,000 20 -8,000 30,000 15 -12,000 60,000 10 -5,000 40,000 15 -10,000 70,000 30 11,000 50,000 40 14,000 80,000 20 14,000 60,000 20 16,000 90,000 20 17,000 70,000 10 16,000 Required: 10. Compute the expected value of the profits of Product X and Product Y. Product X Product Y 11. Based on the computation, which product would you choose to pursue?Problem 2. A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make P2,500; if the weather is cold, the profit will be P1,000. If the stand sells coffee and the weather is hot, it will make P1,900; if the weather is cold, the profit will be P2,000. The probability of cold weather on a given day at this time is 60%. Required: 2.1 Compute for the expected payoff for selling coffee. 2.2 Compute for the expected payoff if the vendor has perfect information. 2.3 Compute for the expected value of perfect information. 2.4 What advise can you give to the beverage stand owner, if somebody offered him to do research and obtain the perfect information at a cost of P1,000