(A)Use @Risk with 100 Replications,provide a Summary Statistics of Portfolio

question 61

Essay

(A)Use @Risk with 100 replications,provide a summary statistics of portfolio return; namely,minimum,maximum,mean,and standard deviation.
(B)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio's annual return will exceed 20%.
(C)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio will lose money during the course of a year.
(D)Suppose that the current price of each stock is as follows: stock 1: $16; stock 2: $18; stock 3: $20; and stock 4: $22.Mrs.Smart has just bought an option involving these four stocks.If the price of stock 1,six months from now are is $18 or more,the option enables Mrs.Smart to buy,if she desires,one share of each stock for $20 six months from now.Otherwise the option is worthless.For example,if the stock prices six months from now are: stock 1: $18; stock 2: $20; stock 3: $21; and stock 4: $24,then Mrs.Smart would exercise her option to buy stocks 3 and 4 and receive (21- 20)+ (24-20)= $5 in each cash flow.How much is this option worth if the risk-free rate is 8%?

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Definitions:

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured, often including preventive services, treatments, and surgeries.

Medical Insurance

Health coverage that typically pays for medical, surgical, prescription drug, and sometimes dental expenses incurred by the insured.

Health Risks

Potential factors or behaviors that can lead to disease, injury, or other health problems.

Moral Hazard

A situation where one party engages in risky behavior knowing that it is protected against the risk because another party will incur the cost.