Could someone work out Problem #9, Chapter 12 from Spreadsheet Modeling and Deci

Question

Could someone work out Problem #9, Chapter 12 from Spreadsheet Modeling and Decision Analysis Edition 7? There are a few answers to the question on Chegg, but it has not been worked out in detail with the specific formulas to use in each cell. If someone could work it out in detail step-by-step, I would really appreciate it!

Hometown Insurance sells 10-year annuities to retirees who are looking for stable sources of investment income. Hometown invests the annuity funds it receives in an equity index fund with annual returns that are normally distributed with a mean of 9% and standard deviation of 3%. It guarantees investors a minimum annual return of 6% and a maximum return (or rate cap) of 8.5%. This limits both the retirees, down-side risk and up-side return potential. Of course Hometown makes its money on these contracts when the actual return exceeds the rate cap Suppose a retiree invests $50,000 in such an annuity contract. Assume investment earnings are credited at the end of the year and are reinvested a. Build a spreadsheet model for this problem that computes the profit Hometown would make on the contract. b. How much money can Hometown expect to make on average on the contract? C. What is the probability that Hometown would lose money on the contract? d. Suppose that Hometown wants to identify the minimum guaranteed annual rate of return that provides a 2% chance of the company losing money on the contract. What should the minimum guaranteed annual rate of return be?

Explanation / Answer

is it the lower one or upper one?

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