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Problem 2: Consider the following cash flows n L M H 0 -10,000 -$10,000 -$10,000 1 $5000 $6000 $7000 2 $2000 $3500 $5000 3
Problem 2: Consider the following cash flows n L M H 0 -10,000 -$10,000 -$10,000 1 $5000 $6000 $7000 2 $2000 $3500 $5000 3 $5000 $6200 $8500 Assume cash flows follow normal distribution and risk-free interest rate of 10%. A. Find the probability that the cash flow at year 2 is less than $3550. B. Find the probability that the PW will be negative.
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