The JRSimplot Company Produces Frozen French Fries That Are Then Sold

question 55

Multiple Choice

The J.R.Simplot Company produces frozen French fries that are then sold to customers such as McDonald's.The "prime" line of fries has an average length of 6.00 inches with a standard deviation of 0.50 inches.To make sure that Simplot continues to meet the quality standard for "prime" fries,they plan to select a random sample of n = 100 fries each day.The quality analysts will compute the mean length for the sample.They want to establish limits on either side of the 6.00 inch mean so that the chance of the sample mean falling within the limits is 0.99.What should these limits be?

• A)Approximately ± 0.13 inches
• B)Within the approximate range of 5.87 inches to 6.13 inches
• C)Within the range of about 4.71 inches to 7.29 inches
• D)Approximately ± 1.29 inches

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Definitions:

Strike Price

The specified price at which an options contract can be executed, determining the buying or selling price of the underlying asset.

Option Contract

A contract which grants the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price within a specific time period.

Underlying Asset

The specific financial instrument (e.g., stock, bond, commodity) on which a derivative's value is based.

Puts

A type of option contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specific time frame.