To value: The option using @RISK. Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

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Answer 1

Question

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

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You are a soybean oil plant manager and know that you will need 1 million bushels of soybeans to keep the plant operating in the month of July. In January, you are fairly certain soybean prices are going to go up, so you want to lock in prices for June purchase. You decide to hedge and purchase 200 July soybean contracts. In January, the July futures price is $14.4850 with a basis of $0.25. Brokerage fees for each contract is $5.00 round-turn. In July, futures prices are $14.2250 with a basis of $0.55. Date Cash Market Futures Market Basis January July Results In January do you take a long or short position in the futures market? In July, what do you do in the futures market? Cash market? What is the cost from the cash market? Was there a gain or loss in the futures market? What was the net profit/loss in the futures market (don’t forget the brokerage fees) What happened to basis? Was this a scenario a long hedge or a…

On Monday, a certain stock closed at $10 per share. Before the stock market opens on Tuesday, you expect the stock to close at $9, $10, or $11 per share, with respective probabilities 0.3, 0.3, and 0.4. Looking ahead to Wednesday, you expect the stock to close 10 percent lower, unchanged, or 10 percent higher than Tuesday’s close, with the following probabilities. Tuesday's Close 10 Percent Lower Unchanged 10 Percent Higher $9 0.4 0.3 0.3 10 0.2 0.2 0.6 11 0.1 0.2 0.7 Early on Tuesday, you are directed to buy 100 shares of the stock before Thursday. All purchases are made at the end of the day, at the known closing price for that day, so your only options are to buy at the end of Tuesday or at the end of Wednesday. You wish to determine the optimal strategy for whether to buy on Tuesday or defer the purchase until Wednesday, given the Tuesday closing price, to minimize the expected purchase price. Develop and evaluate a decision tree. a-1. Determine the optimal…

Answer 2

Question

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Expert Solution & Answer

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Answer 5

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Answer 6

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Answer 7

Chapter 11.3, Problem 26P

a)

Summary Introduction

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Answer 8

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Answer 9

b)

Summary Introduction

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Answer 10

Expert Solution & Answer

Answer 11

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Answer 12

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Answer 13

Ch. 11.2 - If the number of competitors in Example 11.1...Ch. 11.2 - In Example 11.1, the possible profits vary from...Ch. 11.2 - Referring to Example 11.1, if the average bid for...Ch. 11.2 - See how sensitive the results in Example 11.2 are...Ch. 11.2 - In Example 11.2, the gamma distribution was used...Ch. 11.2 - Prob. 6P Ch. 11.2 - In Example 11.3, suppose you want to run five...Ch. 11.2 - In Example 11.3, if a batch fails to pass...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...Ch. 11.3 - Rerun the new car simulation from Example 11.4,...

To value: The option using @RISK. Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Solution Summary: The author explains that simulation model is the digital prototype of the physical model that helps to forecast the performance of a system or model in the real world.

Concept explainers

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Want to see the full answer?

Chapter 11 Solutions

To value: The option using @RISK. Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Solution Summary: The author explains that simulation model is the digital prototype of the physical model that helps to forecast the performance of a system or model in the real world.

Concept explainers

To value: The option using @RISK. Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

To analyze: The distribution of percentage returns using @RISK. Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

Want to see the full answer?

Chapter 11 Solutions

To value: The option using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.

To analyze: The distribution of percentage returns using @RISK.

Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.