Question

Company A designs and manufactures trains and planes and relies on large deals from its customers for these high-cost products. This series of large contracts makes for a very variable revenue stream compared with the more even income it derives from long-term service contracts. The share of revenue from services dropped from 21% to 15% between 2007 and 2010 compared with the much higher figure of 54% for Company B in 2010. In 2011, an analyst predicts that Company A's service share will drop to 14% with a standard deviation of 1% in 2014 and that Company B's service share will increase to 57% with a standard deviation of 2%. Complete parts a) through c) below, assuming the forecast is accurate a) Find the probability that Company A's service share will be lower in 2014 than in 2010 The probability that Company A's service share will be lower is Round to three decimal places as needed.) b) Find the probability that Company B's service share will be higher in 2014 than in 2010 The probability that Company B's service share will be higher is (Round to three decimal places as needed.) c) State the assumption(s) and indicate whether it is likely that the assumption(s) is/are true. Select all that apply □ A. □ B. O C. □ D. It is assumed that each service share percentage can be modeled by a Normal random variable. There is no evidence to suggest that this is true or untrue It is assumed that the service share percentages are independent of each other. This is reasonable as there is no reason to believe Company A and Company B are related It is assumed that the service share percentages are dependent on each other. This is reasonable as Company A's percentage share is decreasing as Company B's is increasing It is assumed that each service share percentage can be modeled by a Binomial random variable. There is no evidence to suggest that this is true or untrue

Answer 1

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