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snow_lady [41]
3 years ago
14

A venture capitalist, willing to invest $1,000,000 , has three investments to choose from. The first investment, a software comp

any, has a 20% chance of returning $5,000,000 profit, a 50% chance of returning $1,000,000 profit, and a 30% chance of losing the $1,000,000 dollars. The second investment, a hardware company, has a 15% chance of returning $5,000,000 profit, a 35% chance of returning $4,000,000 profit, and a 50% chance of losing the $1,000,000 dollars. The third investment, a biotech company, has a 25% chance of returning $5,000,000 profit, a 5% chance of returning $3,000,000 profit, and a 70% chance of losing the $1,000,000 dollars. Find the expected value for each investment.
Business
1 answer:
Scrat [10]3 years ago
7 0

Answer:

Expected Values : 1st Investment = 1200000 ; 2nd Investment = 2000000 ; 3rd Investment = 7000000

Explanation:

Expected Value = Sum of  [(X Value) x (X Probability)]

E[X] = Σ [X.{P(X)}]  

1st Investment

X = 20% , 50% , 30%  ; P(X) = +5000000 , +10000000 , -  10000000

E(X) = 0.2 (5000000) + 0.5 (1000000) + 0.3 (-1000000)

= 1000000+ 500000 - 300000 = 1200000

2nd Investment

X =15% , 35% , 50% ; P(X) = +5000000 , +4000000 , -1000000

E(X) = 0.15 (5000000) + 0.35 (5000000) + 0.5 (-1000000)

= 750000 + 1750000 - 500000 = 2000000

3rd Investment

X = 0.25 , 0.05 , 0.70 ; P(X) = 5000000 , 3000000 , -1000000

E(X) = 0.25 (5000000) + 0.05 (3000000) + 0.70 (-1000000)

= 1250000 + 150000 - 700000 = 700000

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A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per
sergij07 [2.7K]

Answer:

The loss of the financial institution is $413,000

Explanation:

Let's say that after 3 years the financial institution will receive:

0.5 * 10% of $10million

= 0.5 * 0.1 * 10000000

= $500,000

Then, they will pay 0.5 * 9% of $10M

= 0.5 * 0.09 * 10000000

= $450,000

Therefore, their immediate loss would be $500000 - $450000

= $50000.

Let's assume that forward rates are realized to value the rest of the swap.

The forward rates = 8% per annum.

Therefore, the remaining cash flows are assumed that floating payment is

0.5*0.08*10000000 =

$400,000

Received net payment would be:

500,000-400,000= $100,000. The total cost of default is therefore the cost of foregoing the following cash flows:

Year 3=$50,000

Year 3.5=$100,000

Year 4 = $100,000

Year 4.5= $100,000

Year 5 = $100,000

Discounting these cash flows to year 3 at 4% per six months, the cost of default would be $413,000

4 0
3 years ago
Nathan and Diana are married and have three married children and seven minor grandchildren. For tax year 2020, what is the maxim
Luba_88 [7]

Answer:

Maximum amount that can be given to family (including the sons- and daughters-in-law) without using unified transfer tax credit is $390,000.

Explanation:

Given the data in the question;

Nathan and Diana are married and they have 3 married children, meaning Nathan and Diana also have 3 daughters/sons in law married to their children. In addition, they have 7 minor grand children.

Number of donees will be ⇒ 3 + 3 + 7 = 13

Now, we know that; The annual gift tax exclusion for 2019-2020 is $15,000 per donee or individual for every tax payer while that of married couple is $30,000.

Meaning Nathan and Diana can give $30,000as a gift to each of their family members without using any of their unified transfer tax credit.

Hence,

Maximum amount that can be given to family (including the sons- and daughters-in-law) without using unified transfer tax credit will be;

⇒ 13 × $30,000

= $390,000.

6 0
2 years ago
A small craft store located in a kiosk expects to generate annual cash flows of $6,800 for the next three years. At the end of t
Dafna11 [192]

Answer:

The monetary value is $24,201.23

Explanation:

Giving the following information:

Cash flows:

Year 1= $6,800

Year 2= 6,800

Year 3= 6,800

Year 4= $15,000.

The discount rate is 15 percent.

We need to discount each cash flow to the present value:

PV= FV/(1+i)^n

Year 1= 6,800/1.15= 5,913.04

Year 2= 6,800/1.15^2= 5,141.78

Year 3= 6,800/1.15^3= 4,471.11

Year 4= 15,000/ 1.15^4= 8,576.30

Total= $24,201.23

6 0
3 years ago
What is the best way to avoid misusing words in your business and technical writing
Dafna11 [192]
I would say C or D. Remember, bombastic words are not required.
7 0
2 years ago
Read 2 more answers
Jason, your client, is developing a subdivision of 140 houses. He may place deed restrictions on as many as ______ properties.
kolbaska11 [484]

Jason, your client, is developing a subdivision of 140 houses. He may place deed restrictions on as many as 140 (100%) properties.

<h3>What is a deed restriction?</h3>

This is the term that is used to refer to the written agreements that are done in order to restrict and limit activities that may go on in a property.

These are private agreements that are made. It has to be 100 percent on the properties.

Read more on deed restrictions here:

brainly.com/question/4510408

#SPJ1

4 0
2 years ago
Read 2 more answers
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