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Suppose that the fuel price at a specific gas station consists of : A fixed government...

Suppose that the fuel price at a specific gas station consists of :

A fixed government fuel excise of $0.416/L

Wholesale costs for supplier, which average $0.712/L, with a variance of 0.10.

Retail costs (including profit margin) at an average of $0.212/L, with a variance of 0.0012.

a) Find the average total fuel cost on any given day

b) Given that wholesale and retail costs have a correlation of 0.7, find the variance in total fuel price

c) Assuming that the total fuel price is normally distributed, what is the probability of fuel being priced at less than $1/L on any given day?

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Expert Solution

milcah answered 1 year ago
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