Hubble Construction Company Has Submitted a Bid on a State

question 18

Multiple Choice

Hubble Construction Company has submitted a bid on a state government project that is to be funded by the federal government's stimulus money in Arizona. The price of the bid was predetermined in the bid specifications. The contract is to be awarded on the basis of a blind drawing from those who have bid. Five other companies have also submitted bids. Suppose that there are two contracts to be awarded by a blind draw. What is the probability of Hubble winning both contracts? Assume sampling with replacement.

• A) 0.2778
• B) 0.1667
• C) 0.6944
• D) 0.0278

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Definitions:

Conversion Value

The financial value of a convertible security if it is converted into a different form, typically shares of the issuing company's stock.

Call Option Contracts

Financial contracts that give the holder the right, but not the obligation, to buy an asset at a specified price within a specific time frame.

Intrinsic Value

The actual, perceived, or calculated value of an asset, investment, or company based on fundamental analysis without reference to its market value.

Strike Price

The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset.