2. Warren is risk-averse, with Bernoulli utility function u(w) = Vw and initial wealth W.He has access to an investment opportunity described by the following lottery: finalwealth 4W with probability 1/2, final wealth W/9 with probability 1/2. Treat W as agiven number.(a) What is the expected wealth generate by the lottery?(b) What is Warren's expected utility for this lottery?(c) What is Warren's certainty equivalent of this lottery?(d) What is the difference (meaning subtraction) between the lottery's expectedwealth and the certainty equivalent?

It is given that Warren has access to an investment opportunity described as follows:-Final wealth…

Answered: 2. Warren is risk-averse, with…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

See similar textbooks

Similar questions

(a) Find the conditional PMF of (W | 2 ≤ W ≤ 6), where W ∼ Geometric(p = 1/2).(b) Find the expected value E[W | 2 ≤ W ≤ 6].
A local diner has determined that 20% of their customers spend $8.00, 35% spend $10.00, 40% spend $12.00, and 5% spend $15.00 for lunch. Fill in the table of values below to find the expected expenditure per customer at the diner. (please Enter X as a whole number, P(X) as a decimal with two decimal digits, and X*P(X) as a decimal with two decimal digits) X1 = P(X1) = X1*P(X1) = X2 = P(X2) = X2*P(X2) = X3 = P(X3) = X3*P(X3) = X4 = P(X4) = X4*P(X4) =
6 Suppose there are two periods, O and 1. Denote Stochastic discount factor by m(51), where s1 is a random state, 51€ S and Expectation under physical probabilities by E. Denote the payoff of an asset in each state by (s1). Select all (possibly multiple) claims which are true. Select one or more: O a. Discount factor = E{m(s1)] O b. The price of the asset at period O = E(v(51)m(s+)] O c. Atomic (Arrow securities) prices are equal to the stochastic discount factor for each state times the probability of each state. O d. Risk neutral probability is equal to the stochastic discount factor for each state times the probability of each state divided by E[m(s1)]. O e. The stochastic discount can be negative (for standard instantaneous utility we considered)
(c) Find the probability that exactly one of the cases is According to CDC estimates, more than 2.8 million people resistant to any antibiotic. Give your answer to four decimal places. in the United States are sickened each year with antibiotic-resistant infections, with at least 35,000 dying as a result. Antibiotic resistance occurs when disease-causing microbes become resistant to antibiotic drug therapy. Because this resistance is typically genetic and transferred P(X = 1) = to the next generations of microbes, it is a very serious public health problem. Of the infections considered most serious by the CDC, gonorrhea has an estimated 1.14 million new cases occurring annually, and What is the probability that at least one case is resistant to approximately 50% of those cases are resistant to any any antibiotic? (Hint: It is easier to first find the probability antibiotic. Assume a health clinic in California sees 5 that exactly zero of the 5 cases were resistant.) Give your patients…
(a)Consider a flight with a seating capacity of 160 seats. This flight is always full and there is a chance to be overbooked. The actual no-show rate (NSR) of the flight is 3.5% and the estimated NSR is 6.3%. If this flight is oversold according to the estimated NSR, what is the number of excess/extra passengers that will show up and there will be no seats for them on the day of departure? (b)Consider a flight with a seating capacity of 160 seats. This flight is always full and there is a chance to be overbooked. The actual no-show rate (NSR) of the flight is 3.5% and the estimated NSR is 6.3%. If the one-way fare of this flight is $300. If this flight is oversold according to the estimated NSR, what is the additional revenue that this flight will generate due to overbooking?
(A) 0.22 (B) 0.28 (C) 0.33 (D) 0.40 (E) 0.46 You are given the following about 100 insurance policies in a study of time to policy surrender: (i) The study was designed in such a way that for every policy that was surrendered, a new policy was added, meaning that the risk set, r,, is always equal to 100. (ii) Policies are surrendered only at the end of a policy year. (ii) The number of policies surrendered at the end of each policy year was observed to be: 1 at the end of the 1ª policy year 2 at the end of the 2nd policy year 3 at the end of the 3d policy year n at the end of the n" policy year (iv) The Nelson-Aalen empirical estimate of the cumulative distribution function at time n, F(n) , is 0.542. What is the value of n?
An individual has a vNM utility function over money of u(x) = Vx, where x is final wealth. Assume the individual currently has $16. He is offered a lottery with three possible outcomes; he could gain an extra $9, lose $7, or not lose or gain anything. There is a 15% probability that he will win the extra $9. What probability, p, of losing $7 would make the individual indifferent between to play and to not play the lottery? (Make sure to answer in the form, 0.X, i.e. 0.25) Enter your answer here
Consider the probability mass functions of the two investment options that are presented to a businessperson. Investment A Profit X P10 000.00 P5 000.00 - P3 000.00 Probability P(X) 0.6 0.3 0.1 Investment B Profit X P20 000.00 P16 000.00 - P15 000.00 Probability P(X) 0.2 0.5 0.3 If you are the businessperson whom these investment proposals are presented, which investment are you going to choose? Your choice will determine of what type of businessperson you are. Support your answer by computing the mean or expected profit and variance or standard deviation of each investment, then explain on why you choose such investment.
1.The probability mass function P(X=r) of some discrete real-valued random variable X is given by the following table: r 1 2 3 4 P(X = r) 0.35 ? 0.20 0.10 0.20 (a) Fill in the missing value of P(X=1). (b) F(X) is the cumulative distribution function. Determine F(3). (c) Calculate the expected value of this discrete random variable. (d) Calculate the variance of this discrete random variable.
Example 12: The following are the different state of economy, the probability of occurrence of that state and the expected rate of return from security A and B in these different states: Rate of Return State Probability Security A Security B Recession 0-20 - 0:15 0-20 Normal 0.50 0-20 ()-30 Boom 0-30 0.60 0.40 Find out the expected returns and the standard deviations for these two securities. Suppose, an iuvestor has 20,000 to invest. He invests 15,000 in security A and balance in security B, what will be the expected return and the standard deviation of the portfolio?
1. The cumulative probability function of a discrete random variable X is given in the following table: 1 2 3 f(x) 1/8 3/8 3/8 1/8 a. Find the distribution function F(x) for the random variable X. b. Graph this distribution function.
Event A is my wife cooking dinner tonight. It has been determined that P(A) = 0.15. What is P(not A)?

Recommended textbooks for you

A First Course in Probability (10th Edition)

Probability

ISBN:

9780134753119

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability

Probability

ISBN:

9780321794772

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability (10th Edition)

Probability

ISBN:

9780134753119

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability

Probability

ISBN:

9780321794772

Author:

Sheldon Ross

Publisher:

PEARSON

SEE MORE TEXTBOOKS