Question

Assume the tree: B has a payoffof Normal(Mean-51, StdDev-9) B branches to N with probability of AbsolutelNormal(Mean 0.2, Var-0.19)], and to J with the probability Uniform, or the remainder probability, and to M with the remainder probability. N has a payoff of Exponential(Mean payoff-35) J incurs a deficit of Normal(Mean 42, Var-12) M incurs a deficit of Triangular (22, 27, 33) Determine the following to a high degree of accuracy: A, What is the Median of B? B, What is the 50th percentile of B? C, What is the 90th percentile of B? D, What assumptions have been made in finding the above?

Answer 1