2. Alice believes that her car would cost £12500 to replace if it was stolen or damaged.Based on crime statistics for the area she lives in, she believes that the probability ofher car being stolen or damaged is 0.15.(i) Alice's utility function is given by U(w) = ln(w) for w > 0 and she as £35000 in thebank. Calculate how much Alice would be prepared to pay (in a single payment)to insure her car against theft or damage(ii) Repeat the calculation in the previous part but now assume Alice has £500000 inthe bank. 4. Assume that a risk-free money market account is added to the market described in Q2.The continuously compounded rate of return on the money market account is 0% perperiod.(i) Use the method of Lagrange multipliers to determine the proportions of wealthinvested in the three assets available for the minimum variance portfolio withexpected return μ. Your answer must express the proportions as a function of µ.(ii) Recall that the market portfolio has highest Sharpe ratio. Formulate the optimi-sation problem which characterises the market portfolio. You don't have to solvethis optimisation problem.

i) To find out how much Alice would be willing to pay for insurance, we need to compare her expected…

Answered: 2. Alice believes that her car would…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

The probability of a transistor failing between t = a months and t = b months is given by c ect dt. for some constant c. (a) If the probability of failure within the first six months is 10%, what is c? Round your answer to four decimal places. eTextbook and Media (b) Given the value of c in part (a), what is the probability the transistor fails within the second six months? Round your answer to the nearest integer.
In baseball there are many ways to estimate what a team's winning percentage (w) should be against its opponents, given the total runs it has scored and the total runs it has allowed in a certain number of games. Bill James's Pythagorean Formula for the winning percentage estimator is given below. wpe = w = [(# runs scored)2]/[(# runs scored)2 + (# runs allowed)2] A team has currently scored 369 runs and allowed 329 runs. If the team does not allow any more runs for the rest of the season, how many additional runs must they score in order to have a wpe of 80%? (Hint: Let x = the number of runs additional scored.)
10.23. Question. An umbrella-shaped island has a population of 499 healthy people. Alice, who is injected with the T-virus, enters the island on day 0. It is known that anyone infected with the T-virus will become a zombie after 24 hours. Assume that the infected (zombies are considered infected) will spread the virus (through biting) and no one on this island can escape from it. The rate of virus transmission is proportional to the product of the number of infected and non-infected. Thus, if x(t) denotes the number of the infected on day t, then dx dt = kx(500 — x). On day 10, it is observed that 20 people are already infected. Answer the following questions. (a) How many zombies are on the island on day 16? (b) On day 20, how many people are infected but not yet turned into a zombie? (c) A rescue boat with 50 available seats is to be sent to the island. What is the earliest day the boat should be sent to ensure it can rescue all survivors (those not infected)?
Suppose a small quantity of radon gas, which has a half-life of 3.8 days, is accidentally released into the air in a laboratory. If the resulting radiation level is 30% above the safe level, how long should the laboratory remain vacated? (Hint: To start with, determine what fraction of the "resulting radiation level" is the maximum safe level.) The laboratory should remain vacated for days.
Suppose that in a population of shoppers, the proportion of people who had visited supermarket A last month is 0.18. Also that in the same population, the proportion of people who had visited supermarket B last month is 0.60. The proportion of shoppers who had visited both supermarket A and supermarket B last month is 0.12. What proportion of people in this population had visited supermarket A or supermarket B or both last month? (Give your answer to two decimal places.) Answer:
In 2015, the average duration of long-distance telephone calls from a certain town was 9.4 minutes. A telephone company wants to perform a test to determine whether this average duration of long-distance calls has changed. Twenty calls, originating from the town, was Course Name and Code –randomly selected and the mean duration was 10.2 minutes with a standard deviation of 4.8 minutes. a) Using a 1% level of significance, Complete the following: Give the null and alternative hypotheses of this test. ] ii. Determine the critical value(s) of this test. iii. Compute the value of the test statistic State the decision rule Give your decision based on the available sample evidence. ] vi. Hence, state your conclusion. ] b) Construct the 99% confidence interval for the population mean duration of the long-distance calls from the town
3. Suppose Par = $10,000,000; PO = $7,500,000; T = 3; d = 0.006; m = 0.7 and π = 0.5. Then what is the expected zero rate? * O a. 9.97% pa. O b. 8.92% pa. O c. 7.92% pa. O d. 9.64% pa. O e. 9.92% pa.
A individual, with a utility function lnW and an initial wealth level W0, is faced with a fair gamble of winning or losing $h (where W0 > h > 0) with 50-50 chance. (a) Is this individual risk averse? Explain.(b) Suppose that the individual is willing to pay up to an amount of f in order to avoid such a gamble. Give the equation that determines f, and solve the equation for f (i.e., express f in terms of W0 and h). (c) Show that f increases as h increases.

Recommended textbooks for you

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

Elementary Statistics: Picturing the World (7th E…

Statistics

ISBN:

9780134683416

Author:

Ron Larson, Betsy Farber

Publisher:

PEARSON

The Basic Practice of Statistics

Statistics

ISBN:

9781319042578

Author:

David S. Moore, William I. Notz, Michael A. Fligner

Publisher:

W. H. Freeman

Introduction to the Practice of Statistics

Statistics

ISBN:

9781319013387

Author:

David S. Moore, George P. McCabe, Bruce A. Craig

Publisher:

W. H. Freeman

SEE MORE TEXTBOOKS