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Question: In the financial world, there are many types of complex instruments called derivatives that derive their value from the value of an underlying asset. Consider the following simple derivative. A stock's current price is $80 per share. You purchase a derivative whose value to you becomes known a month from now. Specifically, let P be the price of the stock in a month. If P is between $75 and $85, the derivative is worth nothing to you. If P is less than $75, the derivative results in a loss of 100*(75-P) dollars to you. (The factor of 100 is because many derivatives involve 100 shares.) If P is greater than $85, the derivative results in a gain of 100*(P-85) dollars to you. Assume that the distribution of the change in the stock price from now to a month from now is normally distributed with mean $1 and standard deviation $8. Let EMV be the expected gain/loss from this derivative. It is a weighted average of all the possible losses and gains, weighted by their likelihoods. (Of course, any loss should be expressed as a negative number. For example, a loss of $1500 should be expressed as -$1500.) Unfortunately, this is a difficult probability calculation, but EMV can be estimated by an @RISK simulation. Perform this simulation with at least 1000 iterations. What is your best estimate of EMV?
Reflect on the content that you completed this week. Provide one (1) example of information you learned from your completed work that you believe is applicable to a real-world situation. Justify your response.Content: Finding the odds of an event.
Construct a 90% confidence interval for the population proportion p of all Twinkle bulbs.
Model 8 has fairly high profit margins, but it isn't included at all in the optimal mix. Use Solver Table, along with some experimentation on the correct range.
Suppose C(x) = x^3-6X^2+15X where x represents thousands of units. Is there a production level that minimizes average cost? If so what it it?
Express the final area (A) of the carpet in square inches (after both trim jobs) as a polynomial function of x.
Two balls are drawn (without replacement) from an urn that contains four red balls, five green balls, and seven white balls
Compute the extensional [A], coupling [B], and bending stiffness [D] matrices of a bimetallic (copper and aluminum) strip with each lamina 2 mm thick.
Calculate the ROI for 1,500 shares of a mutual fund purchased with an offer price of $22.84 per share if the shares were sold with a net asset value.
Use differentials to estimate the range of temperatures that the taco might attain - find the reference temperature Tref and the maximum deviation dT; the range is the Tref - dT to Tref + dT.
find the constraints and find maximum or minimum value using linear programming method.a computer company makes parts a
At a local restaurant, a couple ordered two dinners for $12.50 each and two drinks for $1.50 each. If the couple left an 18% tip, what was the total cost of the meal?
A wholesale manufacturer of canned corn wants a tin can (a right circular cylinder) that will have a volume of 54 cubic inches. As little tin as possible as possible is to be used in the construction of the can. Determine its height and diameter.
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