Assignment: Forecasting Exercise
Consider the following probability distribution for losses for your firm:
Probability Losses (in 000s)
.20 300
.30 200
.40 100
.10 5,000
1. Calculate the:
a. Expected Value of Losses
b. Variance
c. Standard Deviation
d. Coefficient of Variation
2. A risk manager of a multi-location bicycle shop determined that over the past 10 years, the firm suffered the following annual theft losses to inventories of bicycle tires:
Years 1 $ 15,000
Years 2-4 $ 2,000
Year 5-6 $ 30,000
Years 7-10 4,000
Calculate the:
a) mean or expected loss
b) Standard deviation
c) Coefficient of variation
d) In what range should theft losses fall 99 percent of the time?