A hurricane bond pays the holder a face amount, say $1 million, if a hurricane causes major damage in a certain country. Suppose thatthe chance for such a storm is 4% per year.(a) If a financial firm sells these bonds for $62,000 what is the chance that the firm loses money if it only sells one of these?(b) If the firm sells 1,000 of these policies, each for $62,000, what is the probability that it loses money?(c) How does the difference between parts a and b compare to the situation of a life insurance company that writes coverage tonumerous patients that live or die independently of one another?...(a) If a financial firm sells these bonds for $62,000, the probability that the firm loses money if it only sells one of these isinteger or a decimal.)(Type an

Given Information: A hurricane bond pays the holder a face amount of $1 million. Probability of a…

Answered: A hurricane bond pays the holder a face…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Suppose that you just bought a painting for $1million. You plan to sell it exactly one year fromnow. You don’t know what the exact price will bewhen you sell. Nevertheless, you believe thatthere’s a 65% chance that you can sell it for$1.2million, and a 35% chance that you can sell itfor only $900,000. What is your expected gain orloss for this investment?
In repeated games, players choose their actions... Select one: O a. always simultaneously O b. always sequentially. O c. simultaneously or sequentially.
Charlie buys a one-year term home insurance policy for $p, that will pay $200,000 in the event of a major catastrophe and $35,000 in the event of a minor catastrophe. Charlie's home has a 0.2% chance of a major catastrophe and a 0.7% of a minor catastrophe during the one year term. What did the insurance company charge Charlie for this policy if the company expected to break even?
A customer has approached a bank for a $100,000 one-year loan at an 8% interest rate. If the bank does not approve this loan application, the $100,000 will be invested in bonds that earn a 6% annual return. Withoutadditional information, the bank believes that there is a 4% chance that this customer will default on the loan, assuming that the loan is approved. If the customer defaults on the loan, the bank will lose $100,000. At a cost of $1000, the bank can thoroughly investigate the customer’s credit record and supply a favorable or unfavorable recommendation. Past experience indicates that the probability of a favorable recommendation for a customer who will eventually not default is 0.80, and the chance of a favorable recommendation for a customer who will eventually default is 0.15.a. Use a decision tree to find the strategy the bank should follow to maximize its expected profit.b. Calculate and interpret the expected value of information (EVI) for this decision problem.c.…
You are waiting tables on the side, in order to make rent. You pick up one shift (one day, determined at random) per week. Business is very predictable - on Mondays, 10 tables are occupied with patrons, on Tuesdays, 20 tables, Wednesdays 30 tables, 40 tables on Thursdays and 50 on Fridays. You can assume that you make $10 in tips per table. Your annual rent is $14,400. What is the probability that you are able to make rent from this job, this year? (assuming you work all 52 weeks without a vacation or break)?
You purchase a brand new car for $15,000 and insure it. The policy pays 78% of the car's value if there is an issue with the engine or 30% of the car's value if there is an issue with the speaker system. The probability of an issue with the engine is 0.009, and the probability there is an issue with the speaker system is 0.02. The premium for the policy is p. Let X be the insurance company's net gain from this policy. (a) Create a probability distribution for X, using p to represent the premium on the policy. Enter the possible values of X in ascending order from left to right. P(X) (b) Compute the minimum amount the insurance company will charge for this policy. Round your answer to the nearest cent
C. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions. 10. An investor must decide between two altemative investments-stocks and bonds. The return for each investment, given two future economic conditions, is shown in the following payoff table: Economic Conditions Investment Good Bad Stocks S10,000 S-4.000 Bonds 7.000 2,000 What probability for each economic condition would make the investor indifferent to the choice between stocks and bonds? 11.In Problem 5, Ann Tyler, with the help of a financial newsletter and some library research, has been able to assign probabilities to each of the possible interest rates during the next year, as follows:
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There is a 0.9984 probability that a randomly selected 31-year-old male lives through the year. A life insurance company charges $159 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 31-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.)
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In the Illinois pick 3 lottery game, you pay 50 cents to select a sequence of 3 digits, such as 314. If you select the same sequence of three digits that are drawn by the organizer, then you win and collect 250$. Show all of your steps for all of the following problems: 1. How many different selections are possible and what is the probability of winning? 2. If you win, what is your net profit? if you do not win, what is your net profit? 3. Let X be the random variable representing your net profit. determine the possible values that X can take on, and the probability of each: write in distribution Table 4. Find your expected winnings-that is, find the expected value of X.

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