Business Report for Corvette: Mean, Standard Deviation and Probability Analysis

Topics: Risk, Standard deviation, Central bank Pages: 15 (3762 words) Published: January 3, 2013
Business Report for Corvette

Executive Summary:
This report talks about a Company is called Corvette, which sells luxury sports cars in twelve months from now. There is a table shows the order of five customers and in which currencies. Using those data I will find out mean, standard deviation and some probability for analysis. In addition, these is a case involves an offer was given to Corvette by HSBC for estimating whether it is risk or not. Furthermore, we also thought about what role banks plays in the case, and analyzed the bank itself. Banks expected profit is also mentioned. Finally I used the data about my birthday graphed the two models.

Reading through the whole report, you can understand whether some of behaviors are risky or appropriate done by seller and buyer, such like Corvette, bank and HSBC. In the main body I will also find out some probabilities and its meaning. On the other hand, I will also mention what is risk-averse and its importance. Expected profit can be a good source of evidence so I will calculate it as well. Finally, linear regressions model will provide you specific meaning of data.

Part1: Revenue from foreign customers
From the questions from 1 to 5, we found out the result of some probabilities that mean some degree of the profitability. Be a luxury cars company, we want to know the average profit from those foreign customers in USD. According to those mathematic tools, we got the average profit in USD that is 2,175,398 dollars from the contracts, which means we got 50% chance to earn more than it or less. The consequences from calculation told us that on average, there could be a probability of 5% that the revenue will exceed $ 2,250,000, and it is almost impossible that the revenue could more than $ 2,500,000, which means the chance is almost equal to zero. The chance that this revenue is less than $ 2,150,000 is about 29 percent and the chance that this revenue will be less than $ 2,000,000 is also almost impossible. The consequences will be shown in the appendices’ graphs.

Part 2: An offer from the HSBC
In this case, there are just two parties are trading which are the foreign customers and the corvette company. The most important thing is that there is a third party that is HSBC. The HSBC bank offered and an offer that pays a sure sum of $2,150,000 in return for the revenue in local currencies. In next step, we concerned about whether to accept it. As there are two plans are facing to us. First one is that we accept it and get the sum of 2,150,000 dollars. On the other side, we take risk that try to get higher profit. Actually, this is a balance between the return and risk. Judging the offer is good or not is depend on the risk-averse attitude of the CEO or the Sales manager. If one of them(A) does not care risk than the other one (B), then the uncertain plan should be a better choice; on the contrary, if (B) minds risk very much, then the sure amount plan would be a better choice. According to one's decision, we can estimate their attitude about risk. In this case, the sales manager wants to accept HSBC's offer, but the CEO do not agree. So we can see that the sales manager is more risk-averse. Whereas, in the long term, if the similar case will happen many times, then the uncertain choice will be better, as we got the probability that we could earn more than 2,150,000 dollars nearly 70%, which is high. I think there are 2 main elements involve difference in paying three months’ time rather than in twelve months’ time. 1) Exchange rate risk: What I mean is that if paying sure sum in three months’ time, the exchange rate could be different from twelve months’ time. It could higher or lower than exchange rate of twelve months’ time, which means that for each part could have profit or loss. So this is an uncertain element in this case. So the first difference is that exchange rate, which is changing all the...
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