(A)Use @Risk with 100 replications,provide a summary statistics of portfolio return; namely,minimum,maximum,mean,and standard deviation.
(B)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio's annual return will exceed 20%.
(C)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio will lose money during the course of a year.
(D)Suppose that the current price of each stock is as follows: stock 1: $16; stock 2: $18; stock 3: $20; and stock 4: $22.Mrs.Smart has just bought an option involving these four stocks.If the price of stock 1,six months from now are is $18 or more,the option enables Mrs.Smart to buy,if she desires,one share of each stock for $20 six months from now.Otherwise the option is worthless.For example,if the stock prices six months from now are: stock 1: $18; stock 2: $20; stock 3: $21; and stock 4: $24,then Mrs.Smart would exercise her option to buy stocks 3 and 4 and receive (21- 20)+ (24-20)= $5 in each cash flow.How much is this option worth if the risk-free rate is 8%?
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q22: A correlation matrix must always be symmetric,so
Q41: (A) What fraction of the random numbers
Q53: If you add several normally distributed random
Q57: Obtain another set random numbers by pressing
Q65: Oregon State University has reached the final
Q73: (A)Use a simulation model to help the
Q74: Company experts believe the development time will
Q77: (A) What are the appropriate probability distributions
Q78: Use @Risk simulation add-in to analyze the
Q81: (A)Use @RISK distributions to generate the three
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents