### Calculate the expected value of returns of stock

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##### Reference no: EM13762

1.Harvey's Muffler offers a full refund to anyone who is not satisfied with the  replacement of mufflers. The owners believe the muffler repair  results from car to car are independent and that the probability a customer will ask for refund is 0.30.Suppose a random sample of six cars is observed what is the probability of  two refunds in six cars.

Required:
Consider this situation to be a binomial experiment,  use Minitab to generate a probability distribution two refunds in six cars  and graph and discuss the probability distribution  . What is the probability that two customers will ask for refund?

2. The following data relates to the return of stocks (A & B) depending on the state of Canadian economy in 2013.

Using Minitab

(a) Calculate the expected value of returns of stock A & B ?
(b) Calculate the variance of returns of Stock A & B?
(c) Which stock would you prefer to invest? And why?

3. The distribution for the number of defects per tile made be Heritage Tile is Poisson distributed with a mean of 3 defects per tile. The manager is worried about the high variability.

Required:

Using Minitab and generate the poisson distribution and comment on the spread in the distribution of possible defects.

4. Lorained Corporation is planning to market a new makeup product. According to the analysis made the financial department of the company, it will earn an annual profit of \$4.5 million if the product has high sales, it will earn an annual profit of \$1.2 million if the sales are mediocre and it will lose \$2.3 million a year if the sales are low. The probabilities of three scenarios are 0.32, 0.51 and 0.17 respectively.

Required:

Using Minitab estimate the expected value of its profits (in millions) and standard deviation of profits.

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