Question
Fly-By-Night Corp. runs a proprietary rocket launching facility located in Alamogordo NM. Fly-By-Night offers a launch contract that includes 2 launch attempts. Each attempt can
Fly-By-Night Corp. runs a proprietary rocket launching facility located in Alamogordo NM. Fly-By-Night offers a launch contract that includes 2 launch attempts. Each attempt can result in a successful launch, an aborted launch, or a failure (loss of payload or rocket). The contract works as follows. A first attempt at a launch is made, if the launch is successful the contract is fulfilled. If the first launch is aborted, another attempt will be made one week later. If the first attempt fails (rocket and payload destroyed) then the contract is terminated. If the second attempt after an aborted launch is successful, then the contract is fulfilled. If the second attempt results in either another aborted launch or a failure, then the contract is terminated.
Each attempt costs Fly-By-Night $5M. If a successful launch occurs (in either attempt), then the contract is fulfilled, and Fly-by-Night receives $20M. If the contract is terminated either because of a failure or a second abort, then Fly-by-Night receives nothing. For example, if the first attempt fails and the second attempt is successful, then Fly-by-Night spends $10M in launch costs and receives $20M, netting a profit of $10M on the contract. For each attempt, the probability of an aborted launch is 0.6, the probability of a failure is 0.1 and the probability of a successful launch is 0.3. The two attempts are independent.
Answer the following 5 questions from this information
What is the probability that Fly-by-Night will net $15M on the contract?
What is the probability that Fly-by-Night will net $10M on the contract?
What is the probability that Fly-by-Night will lose $5M on the contract?
What is the expected value of Fly-by-Night's net profit from the contract?
What is the standard deviation of Fly-by-Night's net profit from the contract?
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