3. You are considering investing in one of two projects, which have the following returns andprobabilities of occurrence:Probability0.100.200.250.300.100.05Project A-20%010%15%20%40%Return on InvestmentProject B-35%-10%15%25%40%50%(a) Compute the mean return (Expected value) for each project.(b) Compute the variance of return for each project.(c) If risk is not a concern which project would you prefer?(d) What is the probability that your preferred project (Problem 3.c) is less profitable than thenon-preferred one ( For example if you chose projA in problem 3.c, what is theprobability that Proj.B is more profitable than Proj.A or vice versa)

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Answered: 3. You are considering investing in one…

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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Which of the following are reasons why a process would be considered stochastic? 1. we lack of data on the variable of interest/generating process 2. we lack quantitative understanding of the generating process 3. the generating process itself is random 4. the process can be modelled with certainty 5. the generating process changes over time
How do I solve the problem?
.A new, miracle diabetes drug that diminishes major symptoms of diabetes has been approved by the FDA. Health care professionals and researchers believe that the new drug will prolong lifespan of diabetes patients. If the population is in steady state and the incidence is constant, what will the effect of this new drug be on the prevalence of diabetes in the population? Explain.
1. ABC inc. stock is currently selling for $30, one year from today the stock price can either increase by 20% or decrease by 15%. The probability of an increase in the stock price is equal to 0.3. The one-year risk-free rate is 5% What is the value of a European put that expires in one year with an exercise price of $24. 2. Graphically, show the value and the profit and loss of the following butterfly position: Long in a call with an exercise price of $30, short in 2 calls with an exercise price of $45, and long in a call with an exercise price of 60. All calls are written on the same stock and have the same maturity. 3. "Early exercise of an American option on a stock that does not pay any dividend is not optimal regardless of whether the option is a Call or a Put". True, False, or Uncertain. Explain.
The consulting firm of Winston & Associates has been retained by an electronic component assembly company in Phoenix to design and program a computer simulation model of its operations. Winston & Associates plan to construct the model using ProModel software (see Promodel.com). This software allows the developer to program into the model probability distributions for things like machine downtime, defect rates, daily demand, and so forth. The closer the distributions specified in the computer model match those that actually occur in the assembly plant, the better the simulation model will perform. For one machine center, Winston consultants have assumed that when the center goes down for repairs, the time that it will be down will be normally distributed with an average of 30 minutes and a standard deviation equal to 10 minutes. Before finalizing the model, the consultants will collect a random sample of downtimes and test whether their downtime assumptions are valid. The…
Q3
Only need help with question “b” and “c”
Consider the rate of return of stocks ABC and XYZ. Year 1 2 SAWN T 3 4 5 FABC 24% 10 17 4 1 ABC XYZ a. Calculate the arithmetic average return on these stocks over the sample period. (Round your answers to 2 decimal places.) rxyz 34% 12 18 1 -9 Arithmetic Average ABC XYZ % % b. Which stock has greater dispersion around the mean return?
Benford's Law claims that numbers chosen from very large data files tend to have "1" as the first nonzero digit disproportionately often. In fact, research has shown that if you randomly draw a number from a very large data file, the probability of getting a number with "1" as the leading digit is about 0.301. Suppose you are an auditor for a very large corporation. The revenue report involves millions of numbers in a large computer file. Let us say you took a random sample of n = 250 numerical entries from the file and r = 60 of the entries had a first nonzero digit of 1. Let p represent the population proportion of all numbers in the corporate file that have a first nonzero digit of 1. Test the claim that p is less than 0.301 by using α = 0.01. What does the area of the sampling distribution corresponding to your P-value look like? a. The area in the right tail of the standard normal curve. b. The area not including the right tail of the standard normal curve.…

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