f 29An individual's preferences can be expressed by the utility function. Knowing that theindividual's net wealth (he can still borrow if necessary) is zero,s the maximumwhatprice he would be willing to pay for a game of chance that offered $10 with 50%likelihood and $0 otherwise?O A. The most he would pay is $5.00.O B. The most he would pay is $2.50.C. The most he would pay is $0.00.O D. The most he would pay is $10.00.ure

Let x be the amount to be paid to play the game. P(winning) = 0.50, winning amount = 10-x P(Losing)…

Answered: An individual's preferences can be…

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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An individual's preferences can be expressed by the utility function U(w) = ws Knowing that the individual's net wealth (he can still borrow if necessary) is zero, what is the maximum price he would be willing to pay for a game of chance that offered $12 with 77% likelihood and $5 otherwise? O A. The most he would pay is $0.00. O B. The most he would pay is $2.50. O C. The most he would pay is $10.00. O D. The most he would pay is $5.00.
1. ABC inc. stock is currently selling for $30, one year from today the stock price can either increase by 20% or decrease by 15%. The probability of an increase in the stock price is equal to 0.3. The one-year risk-free rate is 5% What is the value of a European put that expires in one year with an exercise price of $24. 2. Graphically, show the value and the profit and loss of the following butterfly position: Long in a call with an exercise price of $30, short in 2 calls with an exercise price of $45, and long in a call with an exercise price of 60. All calls are written on the same stock and have the same maturity. 3. "Early exercise of an American option on a stock that does not pay any dividend is not optimal regardless of whether the option is a Call or a Put". True, False, or Uncertain. Explain.
Cheryl is considering purchasing additional sewing machines to accommodate the increasing demand for her cosplay costumes. Her alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether her proposal to bid for clothing the official Bandai team is accepted or not. The payoff table below illustrates the profits realized (in $000's) based on the different scenarios Cheryl faces. The probability that her proposal will be accepted is 65%. Alternative Proposal Accepted Proposal Rejected Purchase 1 sewing machine $10 $5 Purchase 2 sewing machines $30 $4 Purchase 3 sewing machines $40 $2 What alternative should Cherly select if she is pessimistic? What alternative should Cherly select based on a criterion of realism with ?α = 0.8?
Suppose I flip a fair coin n = 20 times. A psychic tries to predict the outcome before each flip. Three researchers have different ideas about the psychic's ability. There is Sydney, the Skeptic (S), who thinks the psychic's success rate is between 49% and 51%. There is Morgan, the Mark, M, who thinks that the psychic's success rate is 80%. And there is Carter, the Cynic (C), who thinks the psychic's success rate is 10%. Specifically: S+ 0 ~ U(.49, .51) M + 0 = .80 C0 = .10 %3D In all cases, assume the number of successful predictions follows a binomial distribution with success rate 0. Usek for the number of successes and n for the number of trials. Given all that: Determine the formula for the Bayes factor (a.k.a., likelihood ratio) supporting Carter over Morgan. Call that Bayes factor Bc:M Determine the formula for the Bayes factor (a.k.a., likelihood ratio) supporting Morgan over Sydney. Call that Bayes factor BM:S Determine the formula for the Bayes factor (a.k.a., likelihood…
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
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.
A payoff table is given as S1 S2 S3 D1 250 750 500 D2 300 -250 1200 D3 500 500 600 a. What choice should be made by the optimistic decision maker? b. What choice should be made by the conservative decision maker? c. What decision should be made under minimax regret? d. If the probabilities of d1, d2, and d3 are .2, .5, and .3 respectively, then what choice should be made under expected value?
Q3. Suppose that the market default rate for bonds is given by 0.01, i.e., the probability the market believes that the company may not be able to pay the owner of the bonds is 0.01. Now a credit default swap (CDS) is sold at fair price $ 0.01 per unit. Ackman expects that the true default rate is 0.05, not 0.01. Ackman bought 67 billion units of CDS at the price $ 0.01 per unit. a. Suppose that Ackeman's expectation about the default rate is not correct. I.e., the true default rate for bonds is given by 0.01. Find the cost of the purchase. Find the expected payoff. Find the profit. b. Suppose that Ackeman's expectation is correct. Find the cost of the purchase. Find the expected payoff. Find the profit.
< CO 2. There is a 0.9987 probability that a randomly selected 32 year-old male lives through the year. A life insurance company charges $169 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $110,000 as a death benefit. (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 $ (b) If 32 year-old male purchases the policy, what is his expected value? The expected value is $ (Round to the nearest cent as needed.) « Previous Next » LAON 23 3D 昌吧 MacBook Air 000 000 DD F7 公 F3 F4 F5 F6 F8 $ 4 5. 6 80
Suppose a neighborhood grocery store buys 5 containers of skim milk at the wholesale price of $11 per container and sells it for $22 per container. After the expiration date, unsold milk is removed from the shelves and the grocer receives a credit from the distributor equal to three-fourths of the wholesale price. If the probability distribution of the variable is X and the number of containers sold from this lot is x f(x) 0 1/15 1 2/15 2 2/15 3 3/15 4 4/15 5 3/15 Calculate the expected utility. (Round to two decimal places)
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