Question:
The ABC Investment Company is in the business of making bids on investments offered by various firms that want additional financing. ABC has tabulated its bids on the last 25 issues in terms of their percentage of par value. The bids of ABC's major competitor, as a percentage of par value, are also tabulated on these issues. ABC now wonders if it is using the same rationale as its competitor in preparing bids. In other words, could ABC's bid be used to forecast the competitor's bid? If not, then the competitor must be evaluating issues differently. The data are given in Table P-9.
a. To what extent are the two firms using the same rationale in preparing their bids?
b. Forecast the competitor's bid if ABC bids 101% of par value. Give both a point forecast and an interval prediction.
c. Under part b, what is the probability of ABC winning this particular bid (the lowest bid wins)?
Transcribed Image Text:
TABLE P-9 Issue ABC Bid Competitor Bid Issue ABC Bid Competitor Bid 100.542 99.936 95,834 99.863 1 99.035 2 104.358 3 99.435 4 96.932 5 98.904 6 101.635 100.104 105.032 99.517 95.808 15 96.842 16 99.200 17 101.614 102.010 8 99.501 19 100.898 20 97,.001 99.432 99.965 96.838 10000 101563 8 9 93.849 10 99.412 11 99.949 12 104.012 13 99.473 98.234 99.123 21 100.025 100804 94.803 22 103.014 104300 99.564 103.889 99.348 23 98.702 24 25 102.903 103.834 99.010 100.936 101.834