Clutch

Find your answers, solutions and more...

Try our new improved search engine "Clutch." More relevant, better matches, 100% accuracy at light speed!

  Question Replies Last post
A television network earns an average of $1.6 million each season from a hit program and loses an average of $400,000 each season on a program that turns out to be a flop, and of all programs picked up by this network in recent years, 25% turn out to be hits and 75% turn out to be flops. Suppose that an actual (not perfectly reliable) market research report has the following characteristics based on historical data: if the program is actually going to be a hit, there is a 90% chance that the market researchers will predict the program to be a hit, and if the program is actually going to be a flop, there is a 20% chance that the market researchers will predict the program to be a hit. Given this information, what are the posterior probabilities that a show will be a hit or a flop, given the market research report?

2 Replies
Started by Christine
Last post Best Answer Reply by MindGraft
A customer has approached a local credit union for a $20,000 1-year loan at a 10% interest rate. If the credit union does not approve the loan application, the $20,000 will be invested in bonds that earn a 6% annual return. Without additional information, the credit union believes that there is a 5% chance that this customer will default on the loan, assuming that the loan is approved. If the customer defaults on the loan, the credit union will lose the $20,000. Suppose that an actual (not perfectly reliable) credit report has the following characteristics based on historical data; in cases where the customer did not default on the approved loan, the probability of receiving a favorable recommendation on the basis of the credit investigation was 80%, while in cases where the customer defaulted on the approved loan, the probability of receiving a favorable recommendation on the basis of the credit investigation was 25%. Given this information, what are the posterior probabilities that an earthquake will and will not occur, given the geologists predictions?

2 Replies
Started by Victor
Last post Best Answer Reply by casamo
2 Replies
Started by articafric
Last post Best Answer Reply by Kate_Bona
2 Replies
Started by Succuba
Last post Best Answer Reply by Transviolet
2 Replies
Started by Jimbo
Last post Best Answer Reply by obi_wan_kenobi
2 Replies
Started by letter soul
Last post Best Answer Reply by arkytect
2 Replies
Started by Fantastic_One
Last post Best Answer Reply by Chandler08
A recent MBA graduate is considering an offer of employment at a biotech company, where she has been offered stock options as part of her compensation package. The options give her the right, but not the obligation, to buy 2500 shares of stock either one year from now or two years from now at a price of $50, which is the current market price of the stock. If the price of the stock has risen above $50 at either time, she can buy 2500 shares at $50 and then immediately sell at the current price, thereby making a risk-free profit. On the other hand, if the price of the stock has dropped below $50, she will not exercise the option because it is “out of the money” and she would loose money. Based on historical market information, she estimates that the stock price in the first year will either go up by 25% from its current price, with probability of 0.55, or it will go down by 15%, with probability of 0.45. In either case, she can exercise the options or wait to see what will happen in the second year. If she decides to wait, the in the second year, the stock price will again go up or down by the same amounts and with the same probabilities, starting from either the “up” or “down” price at the end of the first year. . (A) Construct a decision tree to help her model her option decision making. Make sure to label all decision and chance nodes and include appropriate costs, payoffs and probabilities. (B) What is the optimal decision making policy regarding the options in all possible scenarios over the next two years?

2 Replies
Started by Jacinda
Last post Best Answer Reply by Penelope Cruising
A landowner in Texas is offered $200,000 for the exploration rights to oil on her land, along with a 25% royalty on the future profits if oil is discovered. The landowner is also tempted to develop the field herself, believing that the interest in her land is a good indication that oil is present. In that case, she will have to contract a local drilling company to drill an exploratory well on her own. The cost for such a well is $750,000, which is lost forever if no oil is found. If oil is discovered, however, the landowner expects to earn future profits of $7,500,000. Finally, the landowner estimates (with the help of her geologist friend) the probability of finding oil on this site to be 60%. . (A) Construct a decision tree to help the landowner make her decision. Make sure to label all decision and chance nodes and include appropriate costs, payoffs and probabilities. ​ (B) What should the landowner do?

2 Replies
Started by Jane-Doe
Last post Best Answer Reply by Allettext
2 Replies
Started by Emir02
Last post Best Answer Reply by bliss_11
2 Replies
Started by mistglow
Last post Best Answer Reply by Janessa
2 Replies
Started by tatauu79
Last post Best Answer Reply by dj924s
2 Replies
Started by Megatron
Last post Best Answer Reply by hellokitten
2 Replies
Started by Efferter
Last post Best Answer Reply by Frankie
2 Replies
Started by Tereasa
Last post Best Answer Reply by MuraStory
2 Replies
Started by Vivian97
Last post Best Answer Reply by Discovery
2 Replies
Started by Sadia
Last post Best Answer Reply by Lulu
2 Replies
Started by 20PHO7
Last post Best Answer Reply by GeniusbyDesign
2 Replies
Started by max113
Last post Best Answer Reply by Sydney
2 Replies
Started by Zada8201
Last post Best Answer Reply by Katia

 

Normal Topic
Hot Topic (More than 15 replies)
Very Hot Topic (More than 25 replies)

Locked Topic
Sticky Topic