2. An investment firm offers its customers municipal bonds that mature after varyingnumbers of years. Given that the cumulative distribution function of T, the number ofyears to maturity for a randomly selected bond, is0, t< 1,17,F(t) =1find:a) P(T= 5)b) P(T>3)c) P(1.4

Answered: 2. An investment firm offers its…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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The graph shows that: A) to attain a higher expected return the investor has to tolerate higher risk B) there is a positive linear relationship between expected return and risk C) the mean-return compensations of equal-std-increments decline as we target higher and higher risk D) answers 1 and 3 are correct E)answers 1 and 2 are correct
Please solve for all and explain each process
A.2) The time between successive customers coming to the market is assumed to have Exponential distribution with parameter lambda. a) If X1, X2. ..., Xp are the times, in minutes, between Successive customers selected randomly, estimate the parameter of the distribution. b) The randomly selected 15 times between successive customers are found as 1.8, 1.2, 0.8, 1.4, 1.2, 0.9, 0.6, 1.2, 1.2, 0.8, 1.5, 1.8, 0.9, 1.5 and 0.6 mins. Estimate the mean time between successive customers, and write down the distribution function. c) In order to estimate the distribution parameter with 0.4 error and 4% risk, find the minimum sample size.
8 The failure of a circuit board interrupts work that utilizes a computing system, until a new board is delivered. The delivery time, Y, is uniformly distributed on the interval one to six days. The cost of a board failure and interruption includes the fixed cost co of a new board and a cost that increases proportionally to y². If C is the cost incurred, C = Co + c₂y². (a) Find the probability that the delivery time exceeds three days. (b) In terms of co and c₁, find the expected cost associated with a single failed circuit board.
The Arrow-Pratt measures of absolute and relative risk aversion respectively describe the willingness of a consumers to risk a fixed amount of wealth or a fixed fraction of their wealth. This problem will demonstrate this by setting up a simple investment problem. Suppose that consumers begin with initial wealth Wo and may buy shares of a risky asset whose payoff per share is given by 2. (1 w/ prob. P, X = 1-1 w/ prob.1– p. Therefore buying { shares of the risky asset yields final wealth W = Wo +X. Suppose that each consumer may buy an unlimited number of shares, and seeks to maximize expected utility of final wealth max E[u(W)]. (a) Expand the consumer's expected utility maximization problem, and find the first order condition. (b) Let Cara be a consumer whose utility function exhibits constant absolute risk aver- sion UA(W) = 1– e-aW Find Cara's optimal number of shares and show that it does not depend on her starting wealth Wo-

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2. An investment firm offers its customers municipal bonds that mature after varying numbers of years. Given that the cumulative distribution function of T, the number of years to maturity for a randomly selected bond, is 0, t<1, 1, 17, F(t) = find: a) P(T= 5) b) P(T>3) c) P(1.4