Financial Risk Manager Part 1
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As a research analyst, you're analyzing the probability that the prices of copper will be set below $44/kg after the upcoming government elections. Suppose that the prices of copper are uniformly distributed with a floor at $38/kg and a ceiling at $54/kg imposed by the government, then what is the probability that the prices of copper will be set below $44/kg?
Other
Community
NNikitesh
A
0.815
B
0.625
C
0.375
D
0.425
Explanation:
Since the government has set a floor of $38/kg (a or the lower boundary) and the ceiling of $54/kg (b or the upper boundary) the range of copper prices is $54-$38 = $16.
The possible outcomes (prices) of copper that fall below $44 is $44 - $38 = $6.
Therefore, the probability that the prices of copper will be set under $44 is:
(X - a)/(b - a) = (44 - 38)/(54 - 38) = 0.375
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