financial decions


Real Case study: Financial Decisions

Scenario: Corvette sells luxury sports cars. It has just signed a contract to sell, Twelve months from

now, a batch of these cars to various customers around the globe. The following table shows the

orders of five customers. The selling prices are fixed and in local currencies at the exchange rate

prevailing at the time of the delivery. Of course there is uncertainty in the exchange rates, and in

order to cope with this uncertainty estimates as well as standard deviation of these have been

provided by the Bank of America. The report that came with these estimates stated that these rates

are normally distributed and independent.


1) Find the distribution and report the mean and the standard deviation of the uncertain

revenue in $

2) What is the probability that this revenue will exceed $ 2,250,000?

3) What is the probability that this revenue will exceed $ 2,500,000?

4) What is the probability that this revenue will be less than $ 2,150,000?

5) What is the probability that this revenue will be less than $ 2,000,000?

6) HSBC offers to pay a sure sum of $2,150,000 in return for the revenue in local currencies.

What do you think, is this a good offer for Corvette or not?

7) In Corvette, the Sales manager is willing to accept HSBC’s offer, but the CEO is not. Who is

more risk-averse?

8) What other risks the bank is taking apart from the uncertainty in the exchange rates?

9) If the offer is to pay the sure sum in three months’ time rather than in twelve months’ time,

would that make any difference? When would the bank and when the company would

prefer the payment to be made, and why?

10) Corvette has accepted HSBC’s offer. Now consider the bank’s risk, assuming the bank will

convert all currencies into US dollars at the prevailing exchange rates. What is the

probability that the bank will incur a loss?

11) The bank defines its Value-at-Risk as the loss that occurs at the 5th percentile of the

uncertain revenue (5% left tail of the distribution). What is the bank’s Value-at-Risk and

what is the bank’s expected profit?

12) What other options does the bank has if they decide not to convert all/some of the

currencies in twelve months’ time?

13) Collect monthly and weekly data for the four exchange rates into consideration in this

exercise for the last (DD+YY) months/weeks up to November 2012 (where DDMMYY is your

date of birth). Graph those eight time series, and fit two different linear regressions model

into each of them. Comment on which you would prefer and why in each of the eight time


14) With the sixteen models you constructed in Question 13 prepare forecasts for the next MM

months/weeks (where DDMMYY is your date of birth).

Skills: Research Writing

See more: scenario corvette sells luxury sports cars, risks bank taking apart uncertainty exchange rates, writing exercise, why study academic writing, why graph data, why graph, where to find a writing manager, what would you do for 5 dollars, what is a probability, what does writing mean, the five dollars, sales manager find, questions on probability, model report writing, model of report writing, independent bank, good probability questions, for five dollars, five dollars or less, five dollars, financial manager , exercise academic writing, do it for five dollars, convert to academic writing, contract bank

Project ID: #4038560

8 freelancers are bidding on average $218 for this job


Good day! Pleasure bidding over here. Please refer to your message box for details. Thanks for your consideration.

$250 USD in 7 days
(192 Reviews)

Hello sir, Greetings!!!Right person is here according to your requirement. I'm constantly providing great, highly informative, analysis where necessary, great and quality papers, essays, reports, case study, dissert More

$250 USD in 10 days
(61 Reviews)

You think about quality, we deliver it. Please check PM.

$220 USD in 3 days
(27 Reviews)

I have the required expertise and professional qualification to complete the desired task. Check your inbox for further details.

$200 USD in 5 days
(19 Reviews)

Thank you for this opportunity. This expression of interest is supported by my short profile and work sample in the PMB and website portfolio.

$200 USD in 5 days
(4 Reviews)

Hi, I am interested. Regards, Gaudham. R

$250 USD in 5 days
(14 Reviews)

Expert Academic Writer is here to assist you.

$250 USD in 7 days
(11 Reviews)

Hi, I can start ASAP.

$150 USD in 10 days
(7 Reviews)

Hi, I am a London Business School graduate and have done similar projects as part of my coursework. Happy to do this for you. Lets discuss this in detail. Best, Anirudh

$225 USD in 5 days
(1 Review)

Hi, Please check Inbox for details. Thank you-

$200 USD in 3 days
(0 Reviews)