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The Alliance Corp expects to sell the following number of units of copper cables at the prices indicated under three different scenarios in the economy What is the probability of each outcome?
Wiki User
∙ 11y ago
.30*200*15= 900
.50*320*30= 4,800
.20*410*40= 3,280
Total= 8,980
Wiki User
∙ 11y ago
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Business application of probability?
Probability (and probability based models) are used in business scenarios to make decisions under uncertainty. A good example is maintaining safety stocks of inventory when there is a probability that the demand for product might be higher than the supply. Another application is in financial markets where the returns are not certain so people use probabilities to predict outcomes and hedge against uncertainties.
If 4 coins are tossed what is the probability of getting 3 heads?
C1, C2, C3, C4The number of combinations is 4 base 2, or 16.There are 4 possible scenarios where you get 3 heads.So the odds are 4:16, or 1:4.
What does the central limit theorem say about the shape of the sampling distribution of?
The central limit theorem can be used to determine the shape of a sampling distribution in which of the following scenarios?
What is Risk neutral probability measure?
A probability measure allocates a non-negative probability to each possible outcome. All individual probabilities together add up to 1. The "risk-neutral probability measure" is used in mathematical finance. Generally, risk-neutral probabilities are used for the arbitrage-free pricing of assets for which replication strategies exist. This is about relative pricing, based on possible replication strategies. The first argument is that a complete and arbitrage-free market setting is characterised by unique state prices. A state price is the price of a security which has a payoff of 1 unit only if a particular state is reached (these securities are called Arrow securities). In a complete market, every conceivable Arrow security can be traded. It is more easy to visualise these securities in terms of discrete scenarios. (On a continuous range of scenarios we would have to argue in terms of state price density.) The arbitrage-free price of every asset is the sum (over all scenarios) of the scenario-payoff weighted with its state price. Any pricing discrepancy with regards to an implicit state price would enable arbitrage in a complete market. The assumption is that the pursuit of such opportunities drives the prices towards the arbitrage-free levels. Hence the state prices are unique. Since the whole set of Arrow securities is the same as a risk-free bond (sure payoff of 1 unit at maturity), the price of the whole set of Arrow securities must be e^(-rt) (assuming we are now at maturity minus t). Risk-neutral probabilities can then be defined in terms of state prices, or vice versa. A probability measure has to fulfil the condition that the sum of all individual probabilities adds up to 1. Therefore, if we want to create an artificial probability distribution based on the state price distribution, we have to multiply each state price with e^(rt) in order to obtain its probability equivalent. It is not surprising then that any expectation taken under the risk-neutral probability measure grows at the risk-free rate. This is an artificial probability measure, why should we create such a construct? This connection allows us to exploit mathematical tools in probability theory for the purpose of arbitrage-free pricing. The main difficulty about risk-neutral probabilities is that the probability concepts used have not initially been developped for the purpose of financial pricing, therefore, two different languages are used, which can easily be confusing. The economic interpretation of a risk-neutral probability is a state price compounded at the risk-free rate. Anything that has an effect on a state price (preferences, real probability, ...), has an effect on the risk-neutral probability. So now we have a bridge to go from state prices to risk-neutral probabilities and back again. What is this good for? According to the second argument, we can, under certain conditions, specify the unique risk-neutral probability distribution of an underlying asset price with the help of an only incomplete specification of its real probability distribution, thanks to the Girsanov Theorem. If the innovation in the price of the underlying asset is driven by a Brownian motion, then all we need to obtain the risk-neutral probability distribution is the volatility parameter. What can we now do with this risk-neutral probability distribution? We can use the first argument to convert the obtained risk-neutral probability distribution back to a state price distribution, and the state price distribution applied to the payoff distribution (i.e. taking the sum over all scenarios) leads to the arbitrage-free price. These arguments save us a lot of trouble when trying to calculate the arbitrage-free price of an asset. They allow us to avoid the estimation of risk premia, by implicitly using those incorporated in the underlying asset price. The arbitrage-free price is, however, NOT independent of risk-premia. The price of the underlying asset is part of the pricing equation, and the risk-premia are inherent in this price, but because the price of the underlying asset is known to us, we obviously do not need estimate it. It is important to emphasise that the risk-neutral valuation approach only works if the asset to be priced can be perfectly replicated. This is often not true in reality, especially when dynamic replication strategies are involved. Paper explaining risk-neutral probabilities: http://ssrn.com/abstract=1395390
What is the probability that a seven-digit phone number contains the number 7?
Best way to answer this question is by figuring out the probability of a phone number not containing the number 7. There are 9 other numbers that are not a 7, so odds of each digit not being a 7 is 90%. For a 7-digit number, calculation would be 0.9*0.9*0.9*0.9*0.9*0.9*0.9 or 0.9^7. This equals 47.8%, which means the odds of a phone number containing at least one 7 is 100% - 47.8%, which is 52.2%. But phone numbers do not begin with 0 or 1, so if we account for that, the odds of the first digit not being a 7 is 7/8, not 9/10. We replace the first 0.9 with 0.875, and the result is 53.5%. There are other scenarios we can take out, like numbers that begin with 555, but I'll just leave it at that.
Which scenarios depict a workgroup network?
Which of the following scenarios depict a workgroup network
Which of the following scenarios best illustrates the phenomenon of oceans acting as barriers rather than highways?
Different native plants developed in different hemispheres
How much money he could expect to have in his retirement account in 30 years given the following scenarios?
What are the scenarios?
What is the probability that you roll a 5 and a 2?
We assume a 6 sided fair die. Now, note that the probability of rolling any number is independent of the probability of the outcome on the next role of the die. In probability terms we say the two events are independent this implies that is we look at the probability of A and the probability of B the probability of A and B is P(A)xP(B) Since we are look at the probability of a 5 and there are 6 possible outcomes, the probability of a 5 is 1/6 and a similar argument tells us the probability of a 2 is 1/6. Now, since they are independent, the probability of a 5 AND a 2 is 1/6 x 1/6=1/36 If you want to consider dice with different shapes and fewer than 6 numbers, the answer will change. I have considered only a 6 sided fair die since if one understands how this works, one can generalize to other scenarios. The commonly used die is called a cubic polyhedron. Dice come as many different polyhedra and these make for interesting probability questions.
Business application of probability?
Probability (and probability based models) are used in business scenarios to make decisions under uncertainty. A good example is maintaining safety stocks of inventory when there is a probability that the demand for product might be higher than the supply. Another application is in financial markets where the returns are not certain so people use probabilities to predict outcomes and hedge against uncertainties.
What are the advantages of decision tree analysis?
Advantages of decision tree analysis: Easy to interpret, Possible scenarios can be easily added, Value of different scenarios can be determined.
How is probability utilized in newspaper television shows and radio programs that interest you?
Probability is used in these mediums to predict outcomes of events such as elections, sports matches, or economic trends. This helps in creating engaging content and informing the audience about potential future scenarios. Additionally, probability can be used to evaluate the credibility of sources and stories presented in the news.
What is the difference between auditing and scenario in Excel?
They are completely different things. Auditing is for checking errors in cells and formulas. You can use it to do things like check what cells are being used by a formula or checking what formulas use a particular cell. Scenarios all you to keep various sets of values for particular cells and choose one set to put into the cells, and then swap them for another. It can be used to compare different scenarios and save those scenarios. You could use the same worksheet based on different currencies, and using different scenarios swap different currencies into the cells.
Which of the following scenarios describes the US when it received the fewest hours of daylight?
the northern hemisphere is tilted away from the sun
Which of the following scenarios is an example of pure competition?
Answer this question… The price of corn rises due to an increase in consumer demand.
Which of the following scenarios would have been possible for the first time during the song dynasty?
Telling a friend that betrayed you it.
What different scenarios or methods can you manage a VI3?
The diff scenarios by which we can manage the VI3 are 1. Using the service console 2.Web access 3.Virtual infrastructure client.
