4. A car owner is willing to pay £500 at the start of the year to insure against a loss L (in£) if the car was stolen. The car owner has initial capital of £15,000 and the probabilityof the can being stolen is 0.2. If the car owner's utility function is U(w) = ½ w½ forw > 0, calculate L.

Answered: Image /qna-images/answer/6a868bbf-07d9-4b55-92eb-1fda46cd59c4.jpg

Answered: 4. A car owner is willing to pay £500…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 25P

See similar textbooks

Similar questions

1. You have been äsked to estimate the probability of default of a manufacturing company, which has corporate bonds publicly traded. Please list two approaches you can potentially consider.
A borrower bought a house for $250,000; he can obtain an 80% loan with a 30-year fully amortizing, 6% interest rate and monthly payment. Assuming the marginal tax rate for the borrower is 25%. Maintain and insurance are currently $1,200 each per year, Selling cost is 6% of sale; property tax is 2% of the value each year, property value increases 5% per year. What is the first year total tax deduction from owning? $4250.0 $4920.71 53940.0 $3729.25
Calculate the present value of a $1,000 zero-coupon bond with six years to maturity if the yield to maturity is 7%.
- Consider demand: x(p₁) = 400 — 2p1 At a market price of p₁ = $125 per unit: • Determine the social loss due to moral hazard when assuming: 1. Full insurance compared to uninsured 2. A co-payment of $50 compared to uninsured 3. A 75% coinsurance rate compared to uninsured
Weismann Company issued 18-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price?
A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent and 12.5 percent over the past 4 years. Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year? a. less than 5 percent but greater than 2.5 percent b. less than 1.0 percent but greater than 0.5 percent c. less than 2.5 percent but greater than .5 percent d. less than 0.1 percent e. less than 0.5 percent but greater than 0.1 percent
A NEW GENERATOR HAS JUST BEEN INSTALLED. IT IS EXPECTED THAT THERE WILL BE NO MAINTENANCE CHARGES UNTIL THE END OF THE 5TH YEAR. P300.00 WILL BE SPENT AT THE END OF EACH SUCCESSIVE YEAR UNTIL THE GENERATOR IS SCRAPPED AT THE END OF ITS 14TH YEAR OF SERVICE. WHAT SUM OF MONEY SET ASIDE AT THE TIME OF INSTALLATION OF THE GENERATOR AT 6% WILL TAKE CARE OF ALL MAINTENANCE EXPENSES FOR THE GENERATOR? a.P3,958.31 b.P2,424.84 c.P1,524.79 d.P1,694.32
Given an interest rate of 6.1 percentper year, what is the value at Date t = 7 of a perpetual stream of $2,500 annualpayments that begins at Date t = 15?
4. A bridge that was constructed at a cost of P75,000,000 is expected to last 30 years, at the end of which time its renewal cost will be P40,000,000. Annual repairs and maintenance are P3,000,000. What is the capitalized cost of the bridge at an interest of 6%?
Sonia wich to esatablish a trust fund from which her son can withdraw $6,000 every six months for 15 years, when he reach 16 years old. At the end of which time he wil recevie the remaining money in the trust, which you would like to be $25,000. The trust will be invested at 6% per annum componded semi-annually. How large should the trust be?
A company purchased an item that is in the 7-year property class and has a cost basis of $12000. If the company purchased the item in a year that allowed 50% bonus depreciation, how much would the company be allowed to depreciate the asset in year 1 if the balance of the asset basis (after the bonus depreciation is deducted) was depreciated using the MACRS? Report your answer to the nearest dollar. Be sure to include in your answer the sum of both the bonus depreciation and the MACRS depreciation.
your clients insure their condominium unit under a Condominium Unit Owners Comprehensive policy, subject to 1,000 deductible, with no extensions. The building suffers severe damage by earthquake, which is covered by the Condominium Corporation′s insurance, but there is insufficient insurance to cover the loss in full. The Condominium Corporation assesses each unit owner 5,000 to cover the shortfall in its policy, 25% of the unit owners are uninsured for Loss Assessments. How much of the assessment will your clients policy pay?

SEE MORE QUESTIONS

Recommended textbooks for you

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

Practical Management Science

Operations Management

ISBN:

9781337406659

Author:

WINSTON, Wayne L.

Publisher:

Cengage,

SEE MORE TEXTBOOKS

4. A car owner is willing to pay £500 at the start of the year to insure against a loss L (in £) if the car was stolen. The car owner has initial capital of £15,000 and the probability of the can being stolen is 0.2. If the car owner's utility function is U(w) = ½ w½ for w > 0, calculate L.