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- 1) Maximize following equation: w (x,y,) =-3x2+30x-6y2 Subject to x+y=5 2) Find dP/dQ P=5Q+Q2 3) π=-Q2+17Q-60 Find Q that maximizes the function 4) Find dk/dπ and dl/dπ π= 100kl - 5k2 l2+ 2k+ 4lD & R A1 10 - 9 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. Calculate the gain/loss on spot position, the gain/loss on futures position, and the profits from this hedged position by hypothesizing…D & R A1 10 - 8 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. What is the profit from this hedged position if the spot cocoa price in three months turns out to be $3,100?
- 1. Assume that there are two types of driver: One is careful and has a 0.1% of being in an accident. The other type is careless and has a 1% chance of being in an accident. Assume that each type represents 50% of the population. If there is a law mandating that all drivers buy insurance that would cover $100,000 in damages, the actuarially far premium for all drivers would be ________ while if there were no such law, the fair premium would be __________. Group of answer choices A) $100, $1,000 B) $100, somewhere between $100 and $1,000 C) $550, somewhere between $550 and $1,000 D) $550, 1,000 2. The term(s) used to describe the problem(s) that make the actuarially fair premiums different in the two cases in the question above is(are) Group of answer choices A) Asymmetric information B) Moral hazard C) Adverse selection D) A, B, and C E) A and C ( Please solve Both the question I will definitely rate positive )S left a skillet of hot oil on the stove, which torched the kitchen cabinets. In insurance, the fire is an example of: a. peril b. risk c. liability d. abandonmentThe figure below shows Marginal Damage from emissions, the regulator’s BELIEF about the aggregate marginal abatement cost (MAC) and the TRUE aggregate marginal abatement cost that is unobservable by the regulator. Use the figure to answer Questions 20 – 23. [20] Suppose the regulator issued E1 permits to the industry. What is the competitive market permit price? [21] Suppose the regulator issued E1 permits to the industry. What area(s) represent the welfare loss due to the uncertainty in aggregate marginal abatement costs? [22] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What per-unit tax would the regulator set? b) What level of aggregate emissions would result given the regulator’s tax? [23] Suppose the regulator uses its BELIEF about the AMAC function to achieve efficient emissions control using a per-unit uniform emissions tax. a) What area(s) represent the welfare loss due to the…
- 10. A deductible reduces ________ in exactly the same way as ________. Question 10 options: a) moral hazard; cancellation of insurance b) moral hazard; coinsurance c) adverse selection; restrictive provisions d) adverse selection; limits on the amount of insuranceIn order to evaluate the relative advantages of taxes or emissions standards in the face of asymmetric information, suppose that the regulator has an imperfect estimate but cannot exactly observe the firm's abatement cost. More precisely, suppose that the marginal abatement cost estimated by the government is MCA = 2A but the actual marginal cost is MCA = 2A+10. Moreover, suppose that the marginal benefit of abatement MBA is known by the government. Consider the following two extreme scenarios: (i) MBA is vertical at A = 30 and (ii) MBA = 60 at every A (so it is horizontal at 60). For each one of these cases, obtain the Pigouvian Tax t⁰ and the Emissions Standard A⁰ that the government would impose based on estimated abatement costs, provide graphical representations, and calculate respective deadweight losses. Can you intuitively draw some conclusion about the type of industries in which taxes are preferred to standards and vice versa.Consider a regulator with a goal of achieving efficient emissions control. The regulator knows the marginal damage function with certainty, but only has a belief about the aggregate marginal abatement cost for the industry. The marginal damage function is: MD = 3E The regulator’s belief about the aggregate marginal abatement cost is (where the superscript B indicates a belief): AMACB = 60 – 2E Using AMACB what is the regulator’s choice for the seemingly efficient level of emissions? What is the regulator’s choice of emissions tax needed to reach the emissions level from above?
- Suppose a $2,000,000 loss occurs randomly with a 1/200 chance. What is the actuarially fair premium? a. $20,000 b. $200,000 c. $10,000 d. $2,000,000Salyjust heard that her neig bor Rupert was invoved in an automobile scident If Sally assumes that the acident was due to Ruperts poor driving abilties she has 1.Made an internal attrioution2.Made a self-serving attribution3.Made an external attr bution4.Made a distinctive attribution4.7 Hudson Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: Demand Staffing Options High Medium Low Own staff 650 650 600 Outside vendor 900 600 300 Combination 800 650 500 If the demand probabilities are 0.2, 0.5, and 0.3, and the table below shows the total cost of the different options, construct a risk profile for the optimal decision in the table. Option Total Cost Own Staff 635 Outside Vendor 570 Combination 635