Answer Happy

A speculator is considering the purchase of a commodity which he reckons has a 60% chance of increasing in value over the next month. If he purchases the commodity and it does increase in value the speculator will make a profit of about $200 000, otherwise, he will lose $60 000. Assuming that the expected monetary value criterion is applicable, determine whether the following statement is true or false: "The speculator should not purchase the commodity." A True B) False
Perform a sensitivity analysis on the speculator's estimate of the probability of a price increase. At what probability of a price increase will the speculator become indifferent between purchasing and not purchasing the commodity? A probability of a price increase = 30% B probability of a price increase = 70% probability of a price increase = 77% D probability of a price increase = 23%