STAT TECH IN BUSINESS & ECON AC
18th Edition
ISBN: 9781264731657
Author: Lind
Publisher: MCG
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Chapter 20, Problem 5E
To determine
Find the expected opportunity losses.
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Please help me with my assignment please I need to submit this after an hour. Complete solution, a to f. Thank you!
A regional fast-food restaurant is considering an expansion program. The major factor influencing the success of such a program is the future
level of interest rates. It is estimated that there is a 20% chance that interest rates will increase by 2 percentage points, a 50% chance that they
will remain the same, and a 30% chance that they will decrease by 2 percentage points. The alternatives they are considering and possible
payoffs are shown in the following table.
Build 50 restaurants
Build 25 restaurants
Do nothing
Rates up 2%
- $220,000
-$125,000
- $60,000
Which alternative is best, based on expected value?
O They should build 50 restaurants.
O They should build 25 restaurants
O They should do nothing.
Rates unchanged Rates down 2%
$55,000
$25,000
$0
$151,000
$83,000
$5,000
Q5. You are considering two investment choices: a. 1 year CD that pays 2% for sure; b. investing in SP500 with 8% expected and 20% stdev.
Q5c. You want to reach 15% mean return per year as a minimum. What is the least amount you need to allocate to stocks? What is the stdev of the portfolio?
Chapter 20 Solutions
STAT TECH IN BUSINESS & ECON AC
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