a) Suppose that you have a job paying $50,000 per year. With a 15% probability, next yearyour wage will be reduced to $20,000 for the year.1. What is your expected income next year?11. Suppose that you could insure yourself against the risk of reduced consumption nextyear. What would the actuarially fair insurance premium be?b) It has been observed that the consumption expenditure of people drops when they begintheir retirement life. This implies that their consumption is not smooth, and proves thatthey are not fully insured against leaving the workforce. Is this statement true? Explain.c) A water company owns water pipes that burst often due to poor maintenance. Thecompany can invest GHS m in the maintenance of the pipes. More maintenance meansless water loss through bursts, and less compensation payments to residents due to1flooding of their properties. Assume that the value of lost water ismaintenance reduces the amount of loss. Assume that the value of damage to propertiesmso that more3so that more maintenance decreases the amount ofwhere the pipes are routed is mdamage to properties.1. What is the socially optimal level of maintenance, m? What is the associated value oflost water and property damage? (Note: Minimize the total cost function)11. What level of m is chosen when pipes that burst run though land owned bygovernment (the company pays nothing for damages even though there is stillsome damage associated with pipe bursts)? What is the new value for propertydamage? What is the deadweight loss?

a).Answer: (1) The probability that your income next year will be $50,000 is .95; the probability…

Answered: a) Suppose that you have a job paying…

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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Amount of claim (to nearest $20,000) Probability $0 0.70 $20,000 0.17 $40,000 0.06 $60,000 0.04 $80,000 0.02 $100,000 0.01 A. Calculate the expected value? B. How much should the company charge as an average premium so that it breaks even on its claim costs? C. How much should the company charge to make a profit of $50 per policy?
A company is considering introducing a new product, which will require buying new equipment for a fixed monthly payment of $5,000. The product can be sold for $20.00 each. Irvin incurs a variable cost of $10.00 per unit. The company intends to sell 100 units of the new product next month and they would like to realize a monthly profit of $5000. The company will realize the expected profit at the current selling price. True or False
K There is a 0.9986 probability that a randomly selected 32-year-old male lives through the year. A life insurance company charges $189 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 32-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.)
"The current unemployment rate of 9% is too high" is a _____ statement.
When it is sunny, Joe's ice cream truck generates a profit of $547 per day, when it is not sunny, the profit is $250 per day, and when the truck is not out there selling ice cream, Joe loses $120 per day. Suppose 8% of a year Joe's truck is on vacation, and 86% of a year the truck is selling ice cream on sunny days, what is the expected daily profit the truck generates over a year? Enter answer as a decimal rounded to TWO digits after the decimal point.
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9 During this pandemic, a company sometimes suspends payments dividend. Suppose after a dividend is paid, the chance of the next dividend to be paid is 0.9% while after the dividend is deferred, the next dividend opportunity will be deferred by 0.6%. In the long run, how much of the dividend will be paid?
Suppose that you have the following payoff table: State of Nature Decision 51 S2 di 250 100 d2 100 -50 150 Suppose that p-0.75 would make you indifferent between a guaranteed payoff of 150 and the lottery. Find your risk premium for the payoff of 150. The answer has no decimals.
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You own a fruit garden. Choose one of the followings by showing clear calculation. Yearly inflation rate is 5%. Option A: Invest 3 lac BDT to buy cultivation tools/factory. At end of every year you may gain high (8 lac BDT), medium (3 lac BDT) or low (1 lac BDT) with respective probability 0.3, 0.4 and 0.3 for the next 5 years. Option B: Lease the garden. The lessee pays 3.5 lac BDT at the beginning of each year for the next 5 years. There is risk of plant mortality due to hyper production. Loss may be high: 9 lac BDT (probability 0.1) or low: 1 lac BDT. This loss is realized at the end of 5th year only.
Given: 6 = 0.08; Mortality is uniformly distributed throughout life (DeMoivre) 7th w = 100. Find the APV of a continuous 10-year certain and life annuity to (50). a. 11.43 b. 12.06 c. 9.92 d. 10.03 e. 10.99
2. Suppose the probability a plant is destroyed in year 1 is 2% and the probability a plant is destroyed in year 2 assuming it was not destroyed previously is 4%. When the plant is destroyed, it would cost $249219 to replace. Assumed the interest rate is 5%, what is the expected replacement cost, round to nearest dollar? You'll need to find the expected cost each year and discount them at 5%.

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