WEEK 3 LEARNING ACTIVITY ANSWERS

A friend offers you a chance to play a game in which there are only two outcomes, each with equal probability.  If you get the "good" outcome, you win $80.  But if you get the bad outcome, you only win $20. What price to play would make this a fair game (fair bet)?  Carefully follow all mathematical instructions in your answer.

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43. On June 1, you win $1 million in a lottery and imme- diately acquire numerous "friends," one of whom offers you the deal of a lifetime. In return for the million, she'll pay you a cent today, two cents tomorrow, four cents the next day, eight cents the next, and so on, stopping with the last payment on June 21. (a) Assuming you take this deal, how much money will you receive on June 21? (b) Should you take the deal? Explain. (c) Would you take the deal if payments continued for the entire month of June?

Q3. Imagine that two partners are trying to divide up $66. Imagine that this game is played only once and that player 1 gets to decide how to divide the $66. Upload a picture of the game tree. You only need to include a minimum of 5 branches.

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6. Jerry plans to buy a new Bluetooth headset. He knows that the same product is offered in different shops with prices of $44, $49, and $60, and with odds of one-third of finding each price. He just stopped at a shop and knows that their price is $49. If the search cost is $1 per additional search, what should Jerry do?

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3. Niko's monthly car insurance premium is $165, and will increase by 10% next year. How much will he pay per month next year?

Give typed solution only You are deciding whether to buy a car for ​$22,000 or to accept a lease agreement. The lease entails a ​$800 fee plus monthly payments of ​$260 for 48 months. Under the lease​ agreement, you are responsible for service on the car and insurance. At the end of the​ lease, you may purchase the car for ​$9000. Does the total cost of purchasing the car at the end of the lease agreement exceed the cost of purchasing the car at the​ outset? A.​Yes, the total cost of the car at the end of the lease is B.​No, the total cost of the car at the end of the lease is ​

ces The following table shows Uma's estimated annual benefits of holding different amounts of money: Total benefit Extra benefit Average money holdings ($) ($) ($) 135 147 500 600 700 800 900 1,000 1,100 1,200 157 165 171 175 177 177 12 10 8 C 4 2 0 Find the extra benefit of each additional $100 in money holdings and complete the table above. Comparing the benefit with the opportunity cost, in terms of forgone interest, how much money will Uma hold on average if the nominal interest rate is 10 percent? 6 percent? 4 percent? Instructions: Assume that Uma wants her money holding to be in a multiple of $100. Uma's average money holdings at: 10 percent: $ 6 percent: $ 4 percent: $

An oil company is considering drilling in the Gulf at a current cost of $400,000 with an expected profit of $500,000 in three years. The current market rate of interest is 10 percent. Should the company make the investment? Multiple Choice   No, the present value of the profit is less than the present value of the cost..   No, the future value of the profit is less than the present value of the cost.   Yes, the present value of the profit is greater than the present value of the cost..   Yes, the future value of the profit is greater than the present value of the cost.

If a savings account pays 7% interest, then according to the rule of 70 how long will it take for the account balance to double? A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years. If the interest rate is 7%, should the firm undertake the project? Show evidence to support your answer. A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years. If the interest rate is 9%, should the firm undertake the project? Show evidence to support your answer.

Math 3 Suppose you are offered two options: (i) receive Taka 30,000 at the end of 5 years or (ii) receive Taka P today and another P after two years. When you invest the Takas in business that pays 8% or more profit yearly. What value of P would be same as promise of Taka 30,000 to you after 5 years? Assume there is no risk in this future payment.

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At a military base in Texas, Corporal Stan Moneymaker has been offered a wonderful savings plan. These are the salesperson’s words: “During your 48-month tour of duty, you will invest $200 per month for the first 45 months. We will make the 46th, 47th, and 48th payments of $200 each for you. When you leave the service, we will pay you $10,000 cash.” Is this a good deal for Corporal Moneymaker? Use the IRR method in developing your answer. What assumptions are being made by Corporal Moneymaker if he enters into this contract? ( please solve the ırr method not excel solution)

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An advertising executive claims that there is a difference in the mean household income for credit cardholders of Visa Gold and of MasterCard Gold. A random survey of 16 Visa Gold cardholders resulted in a mean household income of $75,650 with a standard deviation of $11,400. A random survey of 7 MasterCard Gold cardholders resulted in a mean household income of $68,280 with a standard deviation of $10,900. Is there enough evidence to support the executive's claim? Let μ₁ be the true mean household income for Visa Gold cardholders and μ2₂ be the true mean household income for MasterCard Gold cardholders. Use a significance level of a = 0.2 for the test. Assume that the population variances are not equal and that the two populations are normally distributed. Step 3 of 4: Determine the decision rule for rejecting the null hypothesis Ho. Round your answer to three decimal places.

Multiple Choice O O Fto point D. B to point A. C to point B. H to point /.

Micro chapter 8

10. Which lottery payout scheme is better? Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum payout, you get $3,000 today. If you pick the payments over time payout, you get three payments: $1,000 today, $1,000 one year from today, and $1,000 two years from today. At an interest rate of 6% per year, you would be better off accepting the At an interest rate of 8% per year, you would be better off accepting the It will depend on the interest rate; advise her to get a calculator. lump sum The lump sum payout is always better. The payments over time payout is always better. None of these answers is good advice. payout since it has the greater present value. payments over time Years after you win the lottery, a friend in another country calls to ask your auvice. Dy wild comcidence, she has just won another lottery with the same payout schemes. She must make a quick…

A6

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QUESTION 6 Paul is a risk loving decision maker, facing a lottery that yields either zero or 100 pounds with equal probabilities. A O a. Paul will agree to sell the lottery if and only if X> 100 Ob. Paul would never sell the lottery because he likes risk O. Paul may agree to sell the lottery for X 50

You expect to receive bonus of $10000 after 1 years of job. Calculate the present value if the discount rate is 2%.

Economics A person likes to gamble and has $100 on him. He is going to play the following game: if he bets $b, then with probability p, 0 < p< 1, he will win $b; with probability 1 – p, he will lose his $b. He is given the opportunity to play at most 20 times. He is a very disciplined gambler and is going to use the following strategy: • Every time he plays, he will make a bet equal to half of the amount of money he has at that moment. • If the amount of money he has gets to $300 or higher, then he will stop playing. Find the probability that, starting with $100 and given 20 chances to play the game, this person will get to $300 or more. Formulate this problem recursively by writing down the “Bellman equation." What is (are) the state variable(s)? Be specific about any constraints or initial/boundary conditions for this problem.

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The average monthly balance in Derek's bank account is $750. Derek spends the same amount of money each day during the month and at the end of the month his account balance is $0. Derek's monthly starting balance is Group of answer choices $750. $1500. $1,000. $16.67.

Risk they say it’s in every decision we make as humans. Kindly discuss a positive or negative RISK you have taken before or seen happening and its impact on you or the people that took such Risks

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