Question 7
Explain the difference between real-world and risk-neutral
probabilities. What happens if you use real-world probabilities
instead of risk-neutral probabilities?
Answers
It is important to use risk-neutral probabilities in pricing derivatives so as to ensure the integrity of the market.
Real-world probabilities refer to the probability of an event happening in the real world while risk-neutral probabilities refer to the probability that the market places on an event occurring. Real-world probabilities take into account the risk, uncertainty, and other variables that affect the likelihood of an event occurring.
On the other hand, risk-neutral probabilities assume that investors are indifferent to risk, and only consider the expected returns of an investment. The use of real-world probabilities instead of risk-neutral probabilities would result in a mispriced security as the pricing formula depends on the use of risk-neutral probabilities. In essence, the use of risk-neutral probabilities implies that the expected return from the security is equivalent to the risk-free rate.
Therefore, a mispricing of the security can lead to a failure of the principle of arbitrage. The use of real-world probabilities results in a different price from risk-neutral probabilities because real-world probabilities incorporate investors' risk preferences and the market's perception of risk. In contrast, risk-neutral probabilities assume a scenario where investors are not affected by risk in their investment decision-making. Using real-world probabilities instead of risk-neutral probabilities would change the expectations of the investors and lead to different pricing and trading strategies.
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Related Questions
Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has ______.
Answers
Company A has: Reached the break-even point and Company A's contribution margin equals the fixed costs.
What is break even point?Break even point is the point in which a company neither make gain or loss.
Based on the information given company A has reached the break-even point because there is no gain or loss.
Company A's contribution margin also equals the fixed costs.
Contribution margin=Sales-Variables cost
Contribution margin=$500,000-$350,000
Contribution margin=$150,000
Contribution margin equal fixed cost of the amount of $150,000.
Inconclusion Company A has: Reached the break-even point and Company A's contribution margin equals the fixed costs.
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Suppose Ross wants to reexamine his decision of buying the bracket and is considering making the brackets in-house. He has determined that setup costs would be $25 in machinist time and lost production time, and 50 brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor time and materials) of producing one bracket would be $14,80. The holding cost would be 10% of this cost. Required: a) What is the daily demand rate? b) What is the optimal production quantity? Round up to nearest whole number. c) Given the optimal production run size in part b, what is the total annual inventory cost (including purchase cost, holding, and setup costs)?
Answers
The daily demand rate is 100 brackets. This is calculated by dividing the annual demand of 10,000 brackets by the number of days in a year, which is 365.
The optimal production quantity is 60 brackets. This is calculated using the economic order quantity (EOQ) formula, which is:
Code snippet
EOQ = sqrt(2DS/H)
Use code with caution. Learn more
where:
D = daily demand rate = 100 brackets
S = setup costs = $25
H = holding costs = 10% * $14.80 = $1.48
The total annual inventory cost is $1,735. This is calculated by adding the annual purchase cost, holding cost, and setup cost. The annual purchase cost is $1,480. This is calculated by multiplying the annual demand of 10,000 brackets by the cost per bracket of $14.80. The annual holding cost is $295. This is calculated by multiplying the optimal production quantity of 60 brackets by the holding cost per bracket of $1.48 and the number of days in a year, 365. The annual setup cost is $912.50. This is calculated by multiplying the number of setups per year, 10,000 / 60 = 166.67, by the setup cost of $25. The total annual inventory cost is $1,735. This is calculated by adding the annual purchase cost of $1,480, the annual holding cost of $295, and the annual setup cost of $912.50.
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How will I apply abm learning strands in real life?
Answers
Answer:
you are the cutest member at brainly have a nice day
The primary cost associated with the level production strategy is the cost ofA.holding inventory.B.hiring and firing workers.C.overtime.D.outsourcing (subcontracting)
Answers
Answer:
The primary cost associated with the level production strategy is the cost of
A.holding inventory.
I need help bruh. Prereading activities include A. concept mapping B. discussion C. Questioning D. all of these
Answers
Explanation
Answer:
D
All of these
Explanation:
1. A parent company sells land to its wholly-owned subsidiary in 2015, reporting a gain of $35,000. In 2020, the subsidiary sells the land to an outside developer and reports a gain of $60,000. In the 2020 consolidation working paper, the elimination of this transaction will result in: A. A $35,000 decrease in beginning retained earnings B. A $60,000 increase in investment in subsidiary C. A $95,000 decrease in land D. A $35,000 increase in gain on sale of land
Answers
Answer:
Explanation:
A $60,000 increase in investment in subsidiary
What are capital resources in the economy?
Answers
Capital resources include money to start a new business as well as everything else that individuals develop to make goods and provide services.
In order to produce goods and services, a corporation need capital resources, which are man-made resources. Businesses can continue to be productive and provide services to their clients with the help of capital goods. Infrastructure, machinery, and other capital resources are examples. Clean energy projects are paid for with the help of money sources, which are managed by capital providers. For instance, a bank may use the deposits made by its clients as a source of capital; however, in this case, the bank manages the money's investment. All assets created by humans and employed in the production of goods are referred to as capital resources. These resources include things like machinery, buildings, and other things. Any equipment or resource used by a company in the creation of goods or services is referred to as a capital resource.
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A restaurant prepares 200.00 pizza slices and sells them at a rate of $15.00/ slice. Expenses for the restaurant include raw material for pizza at $6.00 per slice, $118.00 for monthly rental and monthly insurance of $34.00. Lost sale are taken as $5.00 per unhappy customer. Leftover pizza can be sold for $2.00. The restaurant is open only for 25 days in a month. Today there was a party at nearby office so the demand for pizza went up to 221.00 slices. How much profit could the restaurant earn today? Answer format: Currency: Round to: 0 decimal places.
Answers
Today, the restaurant could earn a profit of $1,870.00.
The profit earned by the restaurant today can be calculated by considering the revenue from pizza sales and deducting the expenses incurred. First, let's calculate the revenue from pizza sales. The restaurant prepared 200.00 pizza slices and sold them at a rate of $15.00 per slice. However, due to the increased demand of 221.00 slices, the total revenue from pizza sales would be 221.00 slices multiplied by $15.00, which equals $3,315.00.
Next, let's calculate the expenses. The raw material cost for each pizza slice is $6.00, and since the restaurant prepared 200.00 slices, the total raw material expense would be 200.00 slices multiplied by $6.00, which equals $1,200.00. Additionally, the monthly rental expense is $118.00, and the monthly insurance expense is $34.00, which sums up to $152.00 for the day.
To account for potential lost sales, we need to consider the number of unhappy customers. Since the demand was 221.00 slices and the restaurant prepared 200.00 slices, there could be 221.00 minus 200.00 unhappy customers, which equals 21. Multiplying this by the lost sale value of $5.00 per unhappy customer, we get a total lost sale expense of 21 multiplied by $5.00, which equals $105.00.
Finally, let's calculate the profit. We subtract the total expenses ($1,200.00 for raw material, $152.00 for rental and insurance, and $105.00 for lost sales) from the total revenue from pizza sales ($3,315.00). Thus, the profit earned by the restaurant today is $3,315.00 minus ($1,200.00 + $152.00 + $105.00), which equals $1,870.00.
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5. Given the model for the Mary Island economy calculate the equilibrium level of income. (2 Points) C= 100+.7YD G = 700 T = 500 1 = 200 6. Calculate the government spending multiplier and the tax multiplier if the MPC is 0.6. 7. Determine the net impact upon the nation's economy that results from equal increases in government spending and taxes of $10 billion when the MPC is.8.
Answers
The net nation's economy from equal increases in government spending and taxes of $10 billion when the MPC is 0.8 is an increase in income by $10 billion.
C = 100 + 0.7YD
G = 700
T = 500
I = 200
Using the Keynesian expenditure-income model -
Y = C + I + G + (X - M)
= (100 + 0.7YD) + 200 + 700 + (X - M)
AE = (100 + 0.7YD) + 200 + 700
Y = (100 + 0.7YD) + 200 + 700
Y = 100 + 0.7YD + 200 + 700
Y = 1000 + 0.7YD
Y = 1000 + 0.7(Y - 500) [ disposable income = YD = Y - T, YD = Y - 500]
Y = 1000 + 0.7Y - 350
0.3Y = 650
= 2166.67
Calculating the government spending multiplier -
Mg = 1 / (1 - MPC)
= 1 / (1 - 0.6)
= 1 / 0.4
= 2.5
Calculating the tax multiplier -
Mt = -MPC / (1 - MPC)
= -0.6 / (1 - 0.6)
= -0.6 / 0.4
= -1.5
Calculating the net impact on nation's economy -
ΔY = (Mg x ΔG) + (Mt x ΔT)
= (2.5 x 10) + (-1.5 x 10)
= 25 + (-15)
= 10
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Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi gulf coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. GCC Corporation owns one of the oldest casinos in the Biloxi, Mississippi, area, and its casino was damaged but not destroyed by the tidal surge from the storm. The reason is that it was located several blocks back from the beach on higher ground. However, since the competitor casinos were completely destroyed and will have to rebuild from scratch, GCC believes that it is likely to have a number of good opportunities. You have been hired to provide GCC with strategic advice. What have you learned about real options that will help you develop a strategy for GCC? (Select all that apply.) GCC has lost all its options due to the disaster and the casino business in the region will take a long time to recover. GCC has the option to expand the operation of the casino if the region is again economically strong enough. GCC has the option to abandon the operation if the region is no longer financially strong enough to support a casino. GCC has the option to delay the operation of the casino by opening it in stages as the region recovers gradually.
Answers
Real Options are options regarding investments that managers can undertake. This provides them with the right, but not the obligation, to expand, abandon, or delay a capital investment project. For GCC, Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi gulf coast in 2005.
Although GCC’s casino was damaged, it was not destroyed, which means that GCC still has its real options left. The real options available for GCC in the Biloxi, Mississippi area are:GCC has the option to expand the operation of the casino if the region is again economically strong enough.GCC has the option to abandon the operation if the region is no longer financially strong enough to support a casino.GCC has the option to delay the operation of the casino by opening it in stages as the region recovers gradually.GCC’s real options have not disappeared. The company can consider different strategies to enhance their value from the casino. Delaying the casino opening could be a good strategy to wait until the region recovers gradually. The casino could then open in stages, or the company could consider whether to expand or abandon the casino depending on the economic situation of the region. Therefore, GCC's real options can help the company to develop a strategy that can lead them to success.
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Mass customization would most affect which feature of Porter's Five Forces Model?
Group of answer choices
A. bargaining power of suppliers
B. economies of scale
C. product differentiation
D. distribution channel
Answers
Mass customization would most affect the feature of product differentiation in Porter's Five Forces Model. Correct option is C.
This can make it more difficult for competitors to imitate the product and thus reduce the threat of new entrants. Mass customization allows for the production of unique products tailored to individual customer needs, which can increase the level of product differentiation and reduce the competition between firms. However, mass customization may also increase the bargaining power of suppliers, as they may need to provide more specialized materials and components for the customized products. Mass customization makes it possible to create one-of-a-kind items that are fitted to each customer's wants, which can boost product distinction and lessen firm competition.
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TRUE / FALSE. limited liability company operating agreements can provide whether formal members' meeting will be held.
Answers
True, Limited Liability Company (LLC) operating agreements can provide whether formal members' meetings will be held. An operating agreement is a crucial document for an LLC, as it outlines the rules, regulations, and provisions for the company's management and operations. This agreement is tailored to the specific needs and preferences of the LLC and its members.
One of the aspects that can be included in an operating agreement is the requirement for formal members' meetings. Members can decide whether they want to hold regular meetings or if they prefer to handle business matters more informally. If they choose to include a formal meeting requirement, the operating agreement can specify the frequency, format, and rules for conducting these meetings.
Incorporating this provision in the operating agreement allows LLC members to clearly define their expectations and procedures for communication and decision-making within the company. It ensures that all members are aware of their responsibilities and provides a framework for resolving disputes or making important decisions.
In summary, it is true that LLC operating agreements can provide whether formal members' meetings will be held. This flexibility allows LLC members to customize their company's structure and operations to best suit their needs and preferences.
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an investor has just purchased a stock fund with a beta of 1.6. this numerical designation means that the fund:
Answers
An investor has just purchased a stock fund with a beta of 1.6. this numerical designation means the stock fund: Is more volatile than the market in general .
Beta may be a measure used in fundamental analysis to determine the volatlity of an asset or portfolio. A stock fund or a equity fund may be a fund that invests in stocks also called equity securities. Stock fund are often contrasted with bond funds and money funds.
There is difference between stock funds and stocks.
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If the offering price of an open-end fund is $13.00 per share and the fund is sold with a front-end load of 5%, what is its net asset value?
Answers
The net asset value (NAV) of the open-end fund with an offering price of $13.00 per share and a front-end load of 5% is $12.35 per share.
The net asset value (NAV) represents the value of each share of the fund's underlying assets. To calculate the NAV after the front-end load, we need to subtract the load percentage from the offering price. In this case, the load is 5% of $13.00, which is equal to $0.65. Subtracting $0.65 from the offering price gives us the net asset value of $12.35 per share.
In mathematical notation, the calculation can be represented as follows:
\(NAV = \text{{Offering Price}} - \text{{Front-End Load}} \\NAV = \$13.00 - (\$13.00 \times 0.05) = \$12.35\)
Therefore, the net asset value of the open-end fund is $12.35 per share after accounting for the 5% front-end load.
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You are willing to supply the most cookies at the _____ price, and consumers will demand the most cookies at the _____ price.
Answers
Answer:
The word should be "best"
Explanation:
It may not be, i cannot say for sure without a word bank but my guess is the word "best"
You are willing to supply the most cookies at the best price, and consumers will demand the most cookies at the best price.
Can u mark brainliest?
What is the opportunity cost of studying for the test in order to get a good grade?
Answers
Answer:
the opportunity cost is the time spent studying and that money to spend on something else
The time spent studying and the money that could have been used for something else are the opportunity costs.
What is opportunity cost?According to microeconomic theory, an activity's opportunity cost is the value or gain that is forfeited in exchange for engaging in that activity as opposed to engaging in an alternative activity. More precisely, it means that by choosing one course of action (such as making an investment), you are forfeiting the chance to take an other course of action. The activity that yields the highest return among all others, net of opportunity costs, is the one that is considered to be the ideal activity.
The goal of opportunity cost is to ensure efficient use of limited resources as a depiction of the relationship between scarcity and choice. It takes into account all decision-related expenses, both explicit and implicit.
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An investment in labor helps a business increase productivity by:
Answers
An investment in labor helps a business increase productivity by bringing in more people to make a product.
What is an investment?It should be noted that an investment simply means a process or action that's used to generate revenue.
In this case, an investment in labor helps a business increase productivity by bringing in more people to make a product.
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target audience → the group of people at whom advertisements are aimed
True
False
Answers
What of the following forms the basis for a financial advantage when making a business decision?multiple choiceWhether opportunity costs are presentWhether irrelevant costs and benefits ariseWhether the dfferential benefits exceed the differential costsWhether alternatives exist
Answers
Answer: whether the differential benefits exceed the differential costs
Explanation:
Taking money to allow someone to get what they want is a(n) ___ choice
ethical
unethical
neither
Answers
Answer:
its b, unethical
Explanation:
fix your grammer
Answer:
Unethical
Explanation:
Imagine yourself later on down the line knowing that you did something that you can't undo. Think before you react!!! People are challenged every day, but it's up to you to make that right decision.
Chick-fil-A is dominating the U.S. fast-food market. Whereas McDonald’s, Subway, Burger King, and Taco Bell trudge along at the top of the heap, Chick-fil-A has quietly risen from a South- east regional favorite to become the largest chicken chain and the eighth-largest quick-service food purveyor in the country. The chain sells significantly more food per restaurant than any of its competitors—twice that of Taco Bell or Wendy’s and more than three times what the KFC Colonel fries up. And it does this without even opening its doors on Sundays. With annual revenues of more than $6 billion and annual average growth of 12.7 percent, the chicken champ from Atlanta shows no signs of slowing down.
How does Chick-fil-A do it? By focusing on customers. Since the first Chick-fil-A restaurant opened for business in the late 1960s, the chain’s founders have held tenaciously to the philoso- phy that the most sustainable way to do business is to provide the best possible experience for customers.
Answers
Chick-fil-A is dominating the U.S. fast-food market and left behind McDonald's, Subway, Burger King and Taco Bell because they focus on providing the best possible customer experience and taking care of what the customers want.
Without even opening its doors on Sundays, the chain has managed to provide the maximum number of meals and has become the largest chicken chain and the eighth-largest quick-service food purveyor in the country, with its annual revenues ranging of more than $6 billion and annual average growth of 12.7 percent.
Chick-fil-A has been so successful in providing an excellent customer experience.
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Match the requirements for application to the type of school.
1. requires high school transcripts or GED application
graduate school
2. requires high school transcripts as well as the SAT or ACT, which demonstrate the ability to succeed
career or technical program
3. requires college transcripts that demonstrate a bachelor’s degree was earned; may require the GRE or another specific exam that demonstrates the ability to succeed in a specific program
Things to match to: graduate school, career or technical program, and university
Answers
Answer:
1. graduate school
2. career or technical program
3. university
Explanation:
I'm assuming after thoroughly reading your long descriptions.
What would be the best decision: To rent month-to-
month until you get a job, or to go ahead and sign a
lease for two years?
O Rent month to month.
O Sign the lease.
Answers
Answer:
Sign the lease.
the principle of need establishes a link between conduct annd consequence
Answers
The principle of need is a fundamental concept in legal and ethical frameworks that seeks to ensure that resources are distributed fairly and equitably.
This principle establishes a link between conduct and consequence, as it dictates that resources should be allocated based on an individual's need, rather than their ability to pay or other arbitrary factors. This means that those who require assistance or support the most should be given priority in the distribution of resources.
By emphasizing the importance of need, this principle helps ensure that resources are allocated more fairly and that those who are most vulnerable are given the support they need to thrive.
Question is incomplete the complete question is
What is the principle of need establishes a link between conduct and consequence?
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a manager has been experiencing challenges during a planning process and must implement strategies to overcome barriers that impede planning. what is the manager's best action?
Answers
A manager has been experiencing challenges during a planning process and must implement strategies to overcome barriers that impede planning. It was the manager's best action measure whether the goals and objectives are befitting and accomplishable.
What is manager?The term manager refers to manage the company. The manger responsibility and duty to manage the all the company work and guided the employees. The operation manager is to manage the new tasks and the lead to the project. The manager responsibility to complete the task on timeline.
According to the case, in the management the manager was the experiencing challenges during a planning process was the evaluated the planning outcomes or result. It was they must implement strategies was the objective and the goal are the accomplished or not.
As a result, the significance of the manager are the aforementioned.
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Which of the following is an example of a foreign direct investment (FDI)?
1. A company in the United States sells payroll software to companies in Western Europe.
2. Continental Wire Company buys real estate in New Zealand to build a new factory.
3. An appliance manufacturer hires a new regional sales manager to serve countries in Latin America.
4. A US medical supply company and a hospital in Greece join forces to create a new business.
Answers
An example of a foreign direct investment is when Continental Wire Company buys real estate in New Zealand to build a new factory. Option 2.
What is foreign direct investment about?Companies or governments considering foreign direct investment (FDI) generally look for target firms or projects in open economies with a skilled workforce and above-average growth prospects. Fairer government regulation is also valued. FDI is frequently more than just capital investment.
Management, technology, and equipment may also be provided as part of the investment. Foreign direct investment has the important feature of establishing effective control of the foreign business or at least significant influence over its decision making.
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PLEASE ANSWER BOTH OF THE QUESTIONS PLS!!!!!!!!!!!!!!!!!!!!
Answers
spring break has jack traveling to the beach. before departing on his journey, he takes some sleep-inducing cold medication. he breaks his leg after falling asleep behind the wheel and colliding with a tree on the highway. which of the following is the hazard in this context? jack. broken leg. knowing how to drive. spring break. taking the medicine
Answers
Answer: im pretty sure its jack
Explanation:
3) What are federal deposit insurance programs? Suppose that walking into your financial institution, you see the following sign on the door: * shows a "NCUA" blue sign * You are walking into
Answers
The sign indicating "NCUA" suggests that the institution is insured by the National Credit Union Administration, which is a federal agency that provides deposit insurance for credit unions.
Federal deposit insurance programs aim to promote stability and confidence in the banking system by safeguarding depositors' funds. These programs are typically operated by government agencies and provide insurance coverage for eligible deposits held in participating financial institutions. In the United States, the two primary deposit insurance programs are the Federal Deposit Insurance Corporation (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions.
The sign indicating "NCUA" on the door suggests that the financial institution you are entering is a credit union and is insured by the NCUA. The NCUA is an independent federal agency that regulates and supervises credit unions and provides deposit insurance coverage up to certain limits to protect depositors in case of credit union failures. The NCUA's deposit insurance program provides similar protection to that offered by the FDIC for banks.
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What are the main regulators?
Answers
A bank or other financial institution's primary supervisory body is called a primary regulator. Primary regulators are typically the same state or federal agency that issued the financial institution's charter.
Which three major regulatory agencies are there?The Federal Reserve System the Office of the Comptroller of the Currency (OCC).The FDICWhat kinds of people act as regulators?Regulators are frequently referred to as animals with warm blood. Mammals and birds are two examples from this category. They work on temperatures through heat production and metabolic processes to keep their bodies at the same temperature.
Who are the primary financial system regulators?Insurance Regulatory and Development Authority of India (IRDAI), Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insolvency and Bankruptcy Board of India (IBBI).
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