Agamble based on a fair coin toss which pays $6.65 if the coin lands heads and $9.85 if the coin lands tails. (fair coin toss i.e. probability of heads is 50% = probability of tails is 50%)EV$8.25E[U(w))UJEV]><=risk attitudeEU_>_U(EV) LowEU = U(EV) NeutralEU =_U(EV) Neutralu(w)w"624.81 $561.51u(w)125+w136.25 $136.25u(w)Sin(w)10.50 $10.50Arisk agent, whose utility is given by U(w) = 5In(W) and initialwealth is $5,000 is faced with a potential loss of $3,800 with a probabilityof p=0.17. What is the maximum premium they would be willing to pay toprotect themselves against this loss?risk appetite(wייטEVintial wealthEU41.375,000U(w-y) = E[U(w)]5In(5,000-y)=B17find yy= $1,077.13 If you are given the opportunity to buy insurance for $500alt y=would you take the insurance?Utility functions w>0u(w)w-9wu(w)5In(w)u'(w)u'(w)u"(w)u"(w)A'(w) :>,<,=0A'(w) :>,<,=0R'(w) : >,<,=0R'(w) :>,<=0show your workA(w)Alw)A'(w)A'(w)R(w)R(w)R'(w)R'(w)

the utility function estimates the government assistance or fulfillment of a customer as a function…

Answered: A gamble based on a fair coin toss…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please teach explain step by step,
3
Your uncle offers you a "sure-fire" investment opportunity. All you have to do is invest $2000 and you will get a guaranteed return of $2063 in 6 months' time. Your alternative is to place your money in a bank account paying 6% p.a. Assuming both alternatives are truly risk-free, would you undertake this investment? Why/why not? Select one: a. Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 3% for the period of the investment. b. No, because the investment will only generate a return of 3.15%, whereas the bank is offering 6%. c. Yes, because the investment will generate a return of 6.3%, whereas the bank is only offering 6%. d. You would be indifferent between accepting and not accepting the investment opportunity, because the return from the investment is the same as the return from putting money in the bank.
A state government hired a contractor for a road construction project. The contractor's type, its cost efficiency, is known to the government. There is a 2/5 probability o its construction cost being 4 (billion dollars per lane) and 3/5 probability of the cost being 6. More lanes yield more social benefit in-the form of faster travel and fewer accidents. The social value V (measured in billions of dollars ) from having N lanes on the highway is V=15N-2N^2/3. The government is interested in option N and writing a contract to maximize the benefit of the state (V) net of the fee paid to the contractor (call it F) ; G=V-F. Your goal as a government official is to design a pair of contracts to separate the types of contractor. You want the contractor to choose (Contract L: Build N, lanes and get paid RL dollars" if its cost type is low cost of $4 billion dollars per lane and to choose "Contract H : Build NH lanes and get paid RH dollars" if its cost type is high cost $6 billion dollars per…
Define the term Aggregating Risk over time?
19
14 of 17 Attractive conditions in America such as better wages, new technology, and bigger living quarters that would cause one to immigrate to the United States are known as Opull factors. Oliabilities. Ⓒassets. Ⓒpush factors Previous Q Search - 0 2
In the table below x denotes the X-Tract Company’s projected annual profit (in $1,000). The table also shows the probability of earning that profit. The negative value indicates a loss. x f(x) x = profit -100 0.01 f(x) = probability -200 0.04 0 100 0.26 200 0.54 300 0.05 400 0.02 8 What is the expected value of profit? a $136 b $142 c $148 d $154
Please no written by hand A reserve price is a minimum price set by the auctioneer. If no bidder is willing to pay the reserve price, the item is unsold at a profit of $0 for the auctioneer. If only one bidder values the item at or above the reserve price, that bidder pays the reserve price. An auctioneer faces two bidders, each with a value of either $186 or $248, with both values equally probable. Without a reserve price, the second highest bid will be the price paid by the winning bidder. The following table lists the four possible combinations for bidder values. Each combination is equally likely to occur.
Does the risk correspond to the dispersion, or uncertainty, impossible outcomes?
1. Individual Problems 17-1 Malaysia You're the manager of global opportunities for a U.S. manufacturer that is considering expanding sales into Asia. Your market research has identified the market potential in Malaysia, the Philippines, and Singapore as described in the following table: Success Level Big Mediocre Failure Malaysia Probability 0.7 0.1 0.2 Units 1,300,000 416,000 0 Philippines Probability 0.2 0.3 0.5 Units 600,000 360,000 0 Singapore Probability 0.4 0.3 0.3 Units 1,500,000 750,000 0 The product sells for $20, and each unit has a constant marginal cost of $16. Assume that the (fixed) cost of entering the market (regardless of which market you select) is $500,000. In the following table, enter the expected number of units sold, and the expected profit, from entering each market. Market Expected Number of Units Sold Expected Profit Malaysia Philippines Singapore…
. If you examine the decision tree in Figure 9.12 (orany other decision trees from PrecisionTree), you willsee two numbers (in blue font) to the right of each endnode. The bottom number is the combined monetaryvalue from following the corresponding path throughthe tree. The top number is the probability that thispath will be followed, given that the best strategy isused. With this in mind, explain (1) how the positiveprobabilities following the end nodes are calculated,(2) why some of the probabilities following the endnodes are 0, and (3) why the sum of the probabilitiesfollowing the end nodes is necessarily 1.

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