# Financial/Analytical Question2

For each of the following 4 alternatives:

Don't use plagiarized sources. Get Your Custom Essay on
Need an answer from similar question? You have just landed to the most confidential, trustful essay writing service to order the paper from.
Just from \$11/Page

i) calculate the expected value (EV) of the coin flip option and briefly explain your logic. Note the amount certain is also an expected value (EV);

ii) calculate the minimum number of successes (HEADS) for the coin flip option to equal or exceed the amount certain;

iii) use Stat Trek to calculate the probability that the minimum number of successes above will be achieved;

(HINT: Google “Stat Trek Binomial Calculator”)

iv) for each of the 3 alternatives, which option would you choose (i.e. the “coin flips” or the “amount certain”)? Briefly explain?

ALTERNATIVE#1

a) \$50,000

OR

b) 10 coin flips each of which has a

i) 50% chance of \$8,500 (Heads)

ii) 50% chance of \$2,500 (Tails)

EV = \$ (for 10 flips)

MINIMUM NUMBER OF SUCCESSES =

STAT TREK PROBABILITY =

YOUR CHOICE of the amount certain or the Coin Flips = (brief explanation)

ALTERNATIVE#2

. a) \$50,000

OR

b) 100 coin flips each of which has a

i) 50% chance of \$750 (Heads)

ii) 50% chance of \$100 (Tails)

EV = \$ (for 100 flips)

MINIMUM NUMBER OF SUCCESSES =

STAT TREK PROBABILITY =

YOUR CHOICE of the amount certain or the coin Flips = (brief explanation)

ALTERNATIVE#3

.a) \$50,000

OR

b) a 1000 coin flips with a

i) 50% chance of \$76 (Heads)

ii) 50% chance of \$25 (Tails)

EV = \$ (for 1000 flips)

MINIMUM NUMBER OF SUCCESSES =

STAT TREK PROBABILITY =

YOUR CHOICE of the amount certain or the coin Flips = (brief explanation)

Binomial Calculator: Online Statistical Table

Use the Binomial Calculator to compute individual and cumulative binomial probabilities. For help in using the calculator, read the Frequently-Asked Questions or review the Sample Problems.

To learn more about the binomial distribution, go to Stat Trek’s tutorial on the binomial distribution.

· Enter a value in each of the first three text boxes (the unshaded boxes).

· Click the Calculate button.

· The Calculator will compute Binomial and Cumulative Probabilities.

 Probability of success on a single trial Number of trials Number of successes (x) Binomial Probability: P(X = 7) Cumulative Probability: P(X < 7) Cumulative Probability: P(X < 7) Cumulative Probability: P(X > 7) Cumulative Probability: P(X > 7)