Although we can determine the optimal bid and the expected profit from that bid in a bidding simulation, we usually cannot determine the probability of winning. True False
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- What is the role that the required rate of return plays in the NPV model? In the IRR model?What is the maximum value that a call can take? Why? Explain which option (i.e. put or call) positions (i.e. long or short) offers the most risk.What are the implications of the weak‐form, semi-strong-form, and strong-form of the EMH for analysis and investment?
- The internal rate of return (IRR), despite its shortcomings, can be a useful analysis tool for decision makers. How is this so?Show by using equations or a diagram, that an expected utility maximizer requires a higher return for a riskier assetWhy do most of the engineers prefer Rate of Return Analysis to the PW method?
- an efficient portolio ...... 1) minimise return for a given level of risk 2) minimise risk for a given level of return 3) minimize both risk and return 4) all the options choose the correct statementWhat are some pros and cons of computing an expected return using a user-specified model versus estimating it from historical data?How is it possible to achieve a higher rate of return without significantlyincreasing risk?