A specialty hedge fund is considering the purchase of a Jackson Pollock painting. It estimates the value of the painting to be $185 million. In an auction, both the number of competing bids and the amount of the competing bids is uncertain. The hedge fund has maintained a file summarizing 10 recent art auctions that it believes are similar to the upcoming auction. It is considering a bid of $163 million and would like to evaluate its chances of winning the upcoming auction with this bid.
a. Construct a spreadsheet simulation model to determine the likelihood of the hedge fund winning the auction. Use a discrete uniform distribution between the minimum and maximum number of bidders in the 10 observed auctions to model the number of bidders in the Jackson Pollock auction. Fit a realistic distribution to the bid data to generate values of competing bid amounts.
b. For a bid amount of $163 million, estimate the probability of the hedge fund winning the auction?
Definitions:
Total Resistance
The overall resistance in an electrical circuit, calculated differently for series and parallel circuits.
Applied Voltage
Applied voltage refers to the electrical potential difference intentionally established across a component or circuit for operation.
Current Flow
The movement of electric charge through a conductor, producing electricity.
Voltage Divider Formula
A mathematical equation used to determine the output voltage across one of the resistors in a circuit that consists of two or more resistors connected in series.
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