Distinguish between risk neutral and real-world default probabilities.
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Q: what should we pay in return each time the sum does not exceed four to make the game fair?
A: Here two dice are rolled So number of total outcomes = 6×6 = 36
Q: investing is $160.4 and the discount rate is 11.1% while the value of non-sustainable investing is…
A: Given: a) P(sustainable) = 0.877 FV(sustainable) = 160.40 FV (non sustainable) = 36.8 discount rate…
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A: Given that The expected value of test information is: zero if the new information does not change…
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A: a) Let's start by calculating the bond's value and expected return for each rating scenario after…
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A: In this problem, we are given information about an insurance company's policyholders. The insurer…
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Q: 5. In the "long run," what is the expected profit, or loss, per game if you pay $2 to play a game…
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Q: 7. A lawyer considering taking a case figures that there is a 40% chance of winning the case in…
A: Winning considered as +ve (also bringing money) Lossing considered as -ve
Q: You are evaluating the risks associated with a construction project. Through careful analysis you…
A: The EMV of the project is the Expected Money Value of the Project.This value is given by the sum of…
Q: Let X be the damage incurred (in $) in a certain type of accident during a given year. Possible X…
A: Consider X be the damage incurred in a certain type of accident during a given year. The probability…
Q: As the manager of a hedge fund, your yearly investment strategy entails a large “left-tail” risk…
A: As the manager of a hedge fund, your yearly investment strategy entails a large “left-tail” risk…
Q: The expected value is $
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Q: Before the board meeting the CEO obtained a market demand forecast report. in the past, when the…
A: Bayes's Rule in Conditional Probability :
Q: Which phases should be carried out by the analyst before the probabilities are quantified? A.…
A: Solution Given information phases should be carried out by the analyst before the probabilities are…
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Q: If a default occurs, all losses between 20% and 50% of the principal are equally likely. If the loan…
A: d option i very much correctoption that is 3.5 million....
Q: Suppose there is a simultaneous Fed sale of bonds and increase in consumer confidence. We…
A: Given that, There is a simultaneous Fed sale of bonds and increase in consumer confidence.
Q: which of the following feature is/are the main components of prospect theory? select one or more…
A: Here we want to know the correct feature of the main components of prospect theory.
Q: If the famous insurance company, Lloyd's of London, insures a $3 million Monet painting for $5000…
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Q: Grab Bags A convenience store has made up 20 gráb bag gifts and is offering themor $2.00 a bag. Ten…
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Q: (3) Sometimes economists speak of the certainty equivalent of a risky stream of income. This problem…
A: Solution :
Q: You are employed at an insurance company and are asked to calculate the probabilities of various…
A: Given Data : Population Mean,μ = 10.0 Population Standard Deviation,σ = 4.0
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Q: Use the accompanying payoff table with event probabilities to answer parts (a) through (h).…
A: Note: In case of multiple subparts, answer to first three subparts will be provided. Kindly post…
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A: let G = Good Report M=Medium Report B=Bad Report From given P(G)=0.2 P(M)=0.5 P(B)=0.3 P(Bf|G)=0.1…
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A: Since you have posted a question with multiple subparts, we will solve first three subparts for you.…
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- You have inherited a lottery ticket which might be a $10,000 winner. You have a 0.25 chance of winning the $10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket for $2,500 - What is your expected return and what should you do if are risk averse?Examine the table above . The insurance company does not know the probabilities of falling sick for each individual. ( a ) If the company charged everybody a premium of Tk.2,000 , who would stay and who would leave the insurance market ? Say why. (All the questions are the same part of one single question. Please answer them all.) ( b ) If the company charged everybody a premium equal to the average of the actuarially fair premiums for all , who would stay and who would leave ? Say why.In repeated games, players choose their actions... Select one: O a. always simultaneously O b. always sequentially. O c. simultaneously or sequentially.
- Do you try to pad an insurance claim to cover your deductible? About 44% of all U.S. adults will try to pad their insurance claims! Suppose that you are the director of an insurance adjustment office. Your office has just received 126 insurance claims to be processed in the next few days. Find the following probabilities. (a) half or more of the claims have been padded (b) fewer than 45 of the claims have been padded (c) from 40 to 64 of the claims have been padded (d) more than 80 of the claims have not been paddedAn airline offers "advance-purchase" fares to customers who buy their tickets at least four weeks before the flight. The airline has noticed that 80% of its customers who buy tickets don't take advantage of advance-purchase fares and the remaining 20% do. The no-show rate for those who don't have advance-purchase fares is 25%, while for those who do have them, it is only 15%. (a) Calculate the probabilities labeled on the tree diagram below. (Give answers correct to three decimal places.) A tree diagram with 6 branches is shown. The tree diagram begins at a point and an upper and lower branch extend from this point to the right. From each of these two branches two more upper and lower branches extend to the right. The branches extending from the first point from top to bottom are labeled a and b and end at points labeled "no advance purchase" and "advance purchase" respectively. The branches extending from "no advance purchase" and "advance purchase" from top to bottom are labeled…You have done risk analysis and determine the following risks and their probabilities could affect your project. Based on these risks, what should you contingency reserve be? Risk 1: 50% chance of a weather delay costing $5,000Risk 2: 20% chance of a worker strike costing $10,000Risk 3: 10% chance of catastrophic failure costing $50,000
- An oil company purchased an option on land in Alaska. Preliminary geologic studies assigned the following prior probabilities.Regarding expected BCA and the example of climate change, O a. reducing greenhouse gases now can be thought of as cheap insurance to rule-out the possibility of a low probability, but very high damages contingency. O b.uncertainty is excellent economic excuse for inaction. Oc the expected net benefits of reducing greenhouse gases are negative since there is a high probability that the costs outweigh the benefits. O d.using a larger discount rate increases the expected net benefits.b. Demand for electricity next year is projected to be one of the following quantities: 18,000GWH with probability of 0.4, 25,000GWh with probability of 0.4, or 30,000GWH. i. If this year's demand is 17,500GWH, what should be the additional amount to plan against if the energy ministry would want to plan for the increase using expected value analysis? ii. What is the standard deviation of the suggested accompanying amount?
