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- A manager is building a simulation model to project future profits. A simulation model template is setup for the task. Simulated Revenue ? Simulated Simulated Material Cost ? Labor Profit Cost ? ? Question 1. She believes that the future revenue will be either $12M, $13M, or $14.5M depending on the future demand being low, medium, or high, respectively. According to her market analysis, the future demand will be low, medium, or high with a probability of 0.3, 0.5, and 0.2, respectively. What is the appropriate @Risk function, including its arguments, that reflects her belief about future revenue?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.A investor estimates that, in a year’s time, a certain stock has a 30% chance to be worth $125 per share, a 45% chance to be worth $90 per share, and a 25% chance to be worth$60 per share. Determine the expectation of the price per share of the stock in a year’s time.
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