SCENARIO 6-2 John Has Two Jobs. for Daytime Work at a Jewelry

question 7

Short Answer

SCENARIO 6-2
John has two jobs. For daytime work at a jewelry store he is paid $15,000 per month, plus a
commission. His monthly commission is normally distributed with mean $10,000 and standard
deviation $2000. At night he works occasionally as a waiter, for which his monthly income is
normally distributed with mean $1,000 and standard deviation $300. John's income levels from these
two sources are independent of each other.
-Referring to Scenario 6-2, for a given month, what is the probability that John's commission from
the jewelry store is at least than $12,000?

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Definitions:

Static Hedging

A financial strategy that involves setting up a position in options or other securities to mitigate risk, without needing to adjust the position frequently.

Capital Outlay

The amount of money spent on acquiring or improving fixed assets, such as buildings, equipment, and land.

Black-Scholes Option-pricing Model

A mathematical model for pricing European call and put options, using factors like the stock's price, exercise price, risk-free rate, and time to expiration.

Dividend Payouts

Distributions made to shareholders by a company, typically from earnings.