Problem 2: Consider the following cash flows M -10,000 -$10.000 -$10,000 $6000 $3500 H $5000 2 $2000 3 $5000 $7000 $5000 $6200 $8500 Assume cash flows follow normal distribution and risk-free interest rate of 10%. A. Find the probability that the cash flow at year 2 is less than $3550. B. Find the probability that the PW will be negative.
Problem 2: Consider the following cash flows M -10,000 -$10.000 -$10,000 $6000 $3500 H $5000 2 $2000 3 $5000 $7000 $5000 $6200 $8500 Assume cash flows follow normal distribution and risk-free interest rate of 10%. A. Find the probability that the cash flow at year 2 is less than $3550. B. Find the probability that the PW will be negative.
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Transcribed Image Text:Problem 2: Consider the following cash flows
M
-10,000 -$10.000 -$10,000
$6000
H
$5000
2 $2000
3 $5000
$7000
$5000
$3500
$6200
$8500
Assume cash flows follow normal distribution and risk-free interest rate of 10%.
A. Find the probability that the cash flow at year 2 is less than $3550.
B. Find the probability that the PW will be negative.
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