STAT. TECH. IN BUSINESS + ECON LOOSELEAF
18th Edition
ISBN: 9781264261765
Author: Lind
Publisher: MCG
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Chapter 20, Problem 1SR
To determine
Prove that the expected payoff for the act of purchasing Rim Homes stock is $1,760.
Expert Solution & Answer
Answer to Problem 1SR
The expected payoff for the act of purchasing Rim Homes stock is $1,760.
Explanation of Solution
From the Table 20-1, the bull market and bear stock for the Rim homes are 2,200 and 1,100, respectively. The corresponding probabilities are 0.60 and 0.40.
The expected payoff for the act of purchasing Rim Homes stock is calculated as follows:
| Payoff value | Probability | Expected value | |
| Bull market | 2,200 | 0.60 | |
| Bear market | 1,100 | 0.40 | |
Then, the expected payoff for the act of purchasing Rim Homes stock is obtained by adding the
Thus, the expected payoff for the act of purchasing Rim Homes stock is $1,760.
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Suppose the Internal Revenue Service reported that the mean tax refund for the year 2022 was $3401. Assume the standard deviation is $82.5 and that the amounts refunded follow a normal probability distribution. Solve the following three parts? (For the answer to question 14, 15, and 16, start with making a bell curve. Identify on the bell curve where is mean, X, and area(s) to be determined.
1.What percent of the refunds are more than $3,500?
2. What percent of the refunds are more than $3500 but less than $3579?
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A normal distribution has a mean of 50 and a standard deviation of 4. Solve the following three parts?
1. Compute the probability of a value between 44.0 and 55.0.
(The question requires finding probability value between 44 and 55. Solve it in 3 steps.
In the first step, use the above formula and x = 44, calculate probability value.
In the second step repeat the first step with the only difference that x=55.
In the third step, subtract the answer of the first part from the answer of the second part.)
2. Compute the probability of a value greater than 55.0.
Use the same formula, x=55 and subtract the answer from 1.
3. Compute the probability of a value between 52.0 and 55.0.
(The question requires finding probability value between 52 and 55. Solve it in 3 steps.
In the first step, use the above formula and x = 52, calculate probability value.
In the second step repeat the first step with the only difference that x=55.
In the third step, subtract the answer of the first part from the…
Chapter 20 Solutions
STAT. TECH. IN BUSINESS + ECON LOOSELEAF
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