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(Solved): Problem 2 (6 points) You are traveling abroad and have only American dollars with you. You are curre ...



Problem 2 (6 points) You are traveling abroad and have only American dollars with you. You are currently in the country’s capital but will soon head to a small town for an extended stay. In the town, no one takes credit cards, and they only accept the domestic currency–shillings. In the capital, you can convert dollars to shillings at a rate of two shillings per dollars. In the town, a dollar only buys 1.6 shillings. Upon your return to the capital at the end of your trip, you can convert shillings back to dollars at a rate of 2.5 shillings per dollar. You estimate that your expenditures in the town will be normally distributed with mean of 400 shillings and standard deviation of 100 shillings. How much shillings should you get before leaving the capital to minimize the expected loss due to currency exchange?



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