Stochastic cash flows

Use this data set for Questions 4a and 4b.

An analyst has characterized the profit function for a business venture by the equation

Z=PQ-K

where

P=unit sales priceQ=sales quantity

K=depreciation and other fixed costs

Suppose that P, Q, and K are random variables with means and variances as follows:

P:mean36,variance6

Q:mean18,000;variance2.2 x 106

K:mean80,000;variancezero

Question 4a:If all these variables are independent, find themeanandvarianceof the profit Z.

Question 4b.If the correlation coefficient between P and Q is- 0.4, and K is independent, find themeanandvarianceof the profit Z.