Question
The mileage driven over the 24 months can be approximated by an exponential distribution with mean 25,000 miles. The best estimate of the interest rate
The mileage driven over the 24 months can be approximated by an exponential distribution with mean 25,000 miles.
The best estimate of the interest rate over the next 24 months is a normal distribution with mean 8.5% and standard deviation 1%.
The value of the car at the end of 24 months is the same under both options (that is, if the car is purchased, the realizable value at the end of month 24 is $29,732 less 24 cents/mile for each mile over 30,000).
I need to know the how to actual generate the values that will help me answer the question. Youtube did not yield any help with how to generate mileage values across 24 months that average 25,000 miles; additionally, I am looking at the interest rate as 8.5% with the 1% standard deviation is telling me that the it can vary between 7.5% and 9.5%, is this assumption true?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started