EBK ECONOMICS OF PUBLIC ISSUES
20th Edition
ISBN: 9780134532295
Author: NORTH
Publisher: YUZU
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Chapter 22, Problem 2DQ
To determine
Which students have the probability of defaulting loans and why?
Concept introduction:
If one alternative is chosen over another alternative, then there is a cost for choosing the respective alternative i.e. the cost of foregone alternative. This foregone cost is known as the opportunity cost.
Explanation:
- The probability of B is lower for defaulting loan because he is opting for a student loan for MBA degree and MBA has better job prospects.
- Thus, his probability of seeking a job is higher, and defaulting the loan would be lower.
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Students have asked these similar questions
Answer these questions using replication or the risk neutral probability. Both methods will produce the same answer.
Problem 2:
At a raffle, 2000 tickets are sold at $5 each for five prizes of $2000, $1000, $500, $250, and $100. You
buy one ticket. What is the expected value of your gain?
1. Find the gain for each prize.
2. Write a probability distribution for the possible gains.
3. Find the expected value.
4. Interpret the results.
This activity focuses on developing direct and supported opinions using various sources of information on the importance of the following topics: non-renewable and renewable energies, economic factors and obstacles that can affect the relationship between international trade and economic growth, devaluation of the currency in countries, and the imbalance of economic equity. In this context, it is essential that, when studying and developing these topics, students understand the concepts of the value of currencies and that leads to devaluation, non-renewable and renewable energy resources, economic development and obstacles, distribution of wealth, economic growth and external and internal constraints, and about international trade as a growth factor.
Thus, the objectives that are intended to be achieved are the following:
Acquire knowledge about the concepts mentioned above.
Determine relationships between economic growth and international trade. Understand what some limitations that…
Chapter 22 Solutions
EBK ECONOMICS OF PUBLIC ISSUES
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