Reference no: EM131387414

Assignment: Forecasting Exercise

Consider the following probability distribution for losses for your firm:

Probability         Losses (in 000s)

.20                         300

.30                         200

.40                         100

.10                      5,000

1. Calculate the:

a. Expected Value of Losses

b. Variance

c. Standard Deviation

d. Coefficient of Variation

2. A risk manager of a multi-location bicycle shop determined that over the past 10 years, the firm suffered the following annual theft losses to inventories of bicycle tires:

Years    1          $ 15,000

Years  2-4         $ 2,000

Year    5-6         $ 30,000

Years  7-10           4,000

Calculate the:

a) mean or expected loss

b) Standard deviation

c) Coefficient of variation

d) In what range should theft losses fall 99 percent of the time?