The first 3 questions can be answered either on the @RISK platform OR in Excel without @RISK.. These first 3 questions require short answers. Please show your work or attach your spreadsheet. Please do not copy any answers off the internet.
The last question is open-ended. I am looking for quality of risk-related thought, not word volume.
Question 1
The data in the file “Question 1 Data” shows the cash flow from three factories which are all owned by the same firm. The value of factory A, B and C is 10, 20 and 5, respectively. What is the average cash flow of the firm? What is the standard deviation of the cash flow of the firm?
Question 2
The data in the file “Question 2 Data” shows the claims an insurance firm is paying out to its policyholders. These claims are representative of the population of claims facing the insurer. What is the Value-at-Risk at the 95% percentile of claims? What is Conditional-Value-at-Risk at the 95% percentile of claims?
Question 3
You grow corn. You have already invested 60,000 in the crop. The crop will be ready for harvest in a few days. According to the local weather report there is a 50-50 chance of rain. If it rains your crop will be damaged and your revenue will be 50,000. If there is no rain, your revenue will be 90,000. A pig farm is willing to buy your crop now, as is, for 64,000. You can buy a specialized micro-climate rain report. The reports costs 1,000. The specialized report does not disclose its accuracy, but by talking to others who have bought the report you are able to deduce that in 70% of the cases when there was rain, the specialized report also predicted rain. You also deduced that of the days the report predicted rain, there was no rain 20% of the days. What do you do?
Question 4
Based on the totality of the knowledge this class offered to you to formulate a reasoned opinion, how would you qualify the chances for a meaningful resolution of climate change risk? Explain your position. (If your position is bleak, do try to end on a hopeful note.)
Comments from Customer
you need to do 1-3 in excel and show your work for each. Please dont copy answers off the internet since Chegg has similar answers but different numbers.
This is in relation to a finance risk management class so please complete your answers with a risk management perspective in mind. Thank you!
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