INVESTMENT STRATEGIES As part of their investment strategy, the Carrington’s have decided to put
a. Determine the optimal investment strategy for the Carrington’s' investment of $100,000.
b. What profit can the Carrington’s expect to make on their investments over the year if they use their optimal investment strategy?
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Chapter 9 Solutions
Finite Mathematics for the Managerial, Life, and Social Sciences
- Although investing all at once works best when stock prices are rising, dollar-cost averaging can be a good way to take advantage of a fluctuating market. Dollar-cost averaging is an investment strategy designed to reduce volatility in which securities are purchased in fixed dollar amounts at regular intervals regardless of what direction the market is moving. This strategy is also called the constant dollar plan. You are considering a hypothetical $1,200 investment in a media company's stock. Your choice is to invest the money all at once or dollar-cost average at the rate of $100 per month for one year. Assume that the company allows you to purchase "fractional" shares of its stock. (a)If you invested all of the money in January and bought the shares for $12 each, how many shares could you buy? shares (b)From the following chart of share prices, calculate the number of shares that would be purchased each month using dollar-cost averaging and the total shares for the year. Round…arrow_forwardCorn crop yields vary by state. In 2008, IOWA averaged 172 bushels/acre. On September 3, 2009, the published market price per bushel was 319.25 cents/bushel. Jimmy Harold is analying a heavily leveraged purchase of some additional acreage, and his decision to purchase is based on the expected yield during his first crop year. After analyzing historical rainfall and long range weather forecasts, Jimmy compiled the following table of crop yields. rainfail yield(bu/acre) probability below average 154 0.15 average 172 0.4 above average 177 0.45 What is the expected corn crop yield, E[Y] based on the data in Jimmy's? E[Y] = (to 2 decimal places).arrow_forwardThe Panama Railroad Company was established in to construct a railroad across the isthmus that would allow fast and easy access between the Atlantic and Pacific Oceans. The following table provides annual returns for Panama Railroad stock from through . Year Return on Panama Railroad Company Stock (%) 1853 -1 1854 -9 1855 19 1856 2 1857 3 1858 36 1859 21 1860 16 1861 -5 1862 43 1863 44 1864 48 1865 7 1866 11 1867 23 1868 20 1869 -11 1870 -51 1871 -42 1872 39 1873 42 1874 12 1875 26 1876 9 1877 -6 1878 25 1879 31 1880 30 a. Select a graph of the annual returns on the stock. The New York Stock Exchange earned an annual average return of from through . A. B. C. D. Can you tell from the graph if the Panama Railroad Company stock outperformed the New York Stock Exchange? b. Calculate the mean annual return on Panama Railroad…arrow_forward
- A manufacturer produces a toy sold during the summer season at a unit production cost of $5. The manufacturer sells the toy to a retailer, who then sells the product for $35 to the end customer. The manufacturer and retailer have agreed upon a revenue sharing contract that coordinates the supply chain and optimizes the expected profit of the entire supply chain (i.e., the retailer and the manufacturer), which is expected to be $4,000 over the summer selling season. If the wholesale price of the revenue sharing contract is $2, what is the manufacturer’s expected profit? PLEASE SHOW CALCULATIONSarrow_forwardInvesting: Inverse ETFs (Exchange Traded Funds) Inverse ETFs, sometimes referred to as "bear market" or "short" funds, are designed to deliver the opposite of the performance of the index or category they track, and so can be used by traders to bet against the stock market. The following table shows the performance of three such funds as of August 5, 2015.† Year-to-Date Loss (%) MYY (ProShares Short Midcap 400) 6 SH (ProShares Short S&P 500) 5 REW (ProShares UltraShort Technology) 7 You invested a total of $13,000 in the three funds at the beginning of 2011, including an equal amount in SH and REW. Your year-to-date loss from the first two funds amounted to $570. How much did you invest in each of the three funds? MYY$ SH$ REW$arrow_forwardSee attachment 11.3 6arrow_forward
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