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Desklib Study Material and Solved Assignments

   

Added on  2022-11-24

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Question 1
Q1a)
Royal Battlement Peace
Royal family 0.7 0.3 0
Battlement 0.4 0 0.6
Peace 0.1 0.4 0.5
Q1b)
P(Not reassigned to patrol battlement) = probability patrol royal family + probability patrol peace
= 1/3*0.1 + 1/3* 0.5 = 0.2
Q1c)
Probability Royal family 0.7 0.3 0
Bet $5 $2 $1
Expected payoff = 0.7 *$5 + 0.3*$2 + 0*$1 = $4.1
Desklib Study Material and Solved Assignments_1

Question 2
Q2a)
Q2b)
From the excel
Return A
Return
B
Return
A 1
Return
B 0.451917 1
Q2c)
The positive coefficient of 0.451917 indicates a moderate direct connection between the Return A
and Return B, therefore, the more the moderate shares are return in back bank A, the more the
moderate shares are also return in bank B.
Q2d)
The features of the current data to be preserve include the dates
The approach used is called Monte Carlo simulation
To generate the random numbers in excel we use the two functions
1. RAND ( ): generating random numbers from 0 and 1
2. RANDBETWEEN(a, b): generating random numbers from the integers between a and b
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
-0.08 -0.06 -0.04 -0.02 0 0.02 0.04 0.06
Return B
Return A
Desklib Study Material and Solved Assignments_2

To avoid the random numbers generated from changing on excel we enter RAND ( ) on the bar
formula and press the key function F9. Similarly, copy the random numbers generated using Ctrl-C
and paste on the same location.
RANDBETWEEN would only generate integer values.
Desklib Study Material and Solved Assignments_3

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