1. Which of these cannot be considered a non-compensatory attribute when buying a phone? A Cost C. Warranty D. Cannot decide B. Specifications 2. If there are three possible outcomes under the same decision node, then A. the probability of each outcome occurring is 1/3.
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- 12. Over the last decade, robotic-drone a research and development company has researched in new drone technology for home delivery. Their sales department considers that they could sell as many as $90 million per year with a probability of 20%. With a most likely value of $76 million with a probability of 45% and a lowest value of $50 million. a. Determine the expected value of their sales. b. The sales department estimates that they could maintain this sales rhythm for 4 years with a probability of 67% or that this sales rhythm could be maintained for 8 years. Determine the Expected Value for the PW if the company considers a yearly interest rate of 10%6. A risk-averse individual is offered a choice between a gamble that pays $1000 with probability of 25% and $100 with probability of 75% or a pay- ment of $325. (a) Which gamble would he choose? (b) What is the payment was $320Economics A group of 20,000 households in one neighborhood was covered in fire insurance that estimates a 2% probability of loss. Assuming that in the same neighborhood, the actual number of houses gutted by fire within one coverage cycle is 350 to 450. Requirements; a. Compute for the expected value of the loss.
- 1. A dealer decides to sell a rare book by means of an English auction with a reservation price of 54. There are two bidders. The dealer believes that there are only three possible values, 90, 54, and 45, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue is approximately ______. 2. A seller knows that there are two bidders for the object he is selling. He believes that with probability 1/2, one has a buyer value of 5 and the other has a buyer value of 10 and with probability 1/2, one has a buyer value of 8 and the other has a buyer value of 15. He knows that bidders will want to buy the object so long as they can get it for their buyer value or less. He sells it in an English auction with a reserve price which he must…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.A lottery system has balls numbered 1 to 65 and randomly selects 6 of the lottery balls. There is only one prize of $ 10,000,000.00 which is awarded only it a lottery player selects the correct set of 6 lottery balls. a) If a lottery ticket costs $ 5.00, what is a lottery player's expected value? b) How much would the lottery prize have to be worth if it was to be a fair game? (Note: Include dollar signs in your answer)
- 4. $1000 with of $325. (a) (b) Adam is risk averse. He is offered a choice between a gamble that pays a probability of 25% and $100 with a probability of 75%, or a sure payment What is the expected payment of the gamble? Will Adam prefer gamble over sure payment? Would he change his mind if the sure payment is $320 instead of $325? (c) If this individual has a utility function u(x) = lnx, would he prefer the payment of $320 or the gamble? (d) In the CRRA utility family u(x) = x¹-7. If this individual has a utility where y = 0.01, would he prefer the payment of $320 or the gamble?1. Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: Decision s1 s2 s3 d1 d2 150 200 200 50 200 500 The probabilities of s1, s2, and s3 are unknown. Using the optimistic approach, what is the optimal decision and what is the value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to arrive at this decision in the second. Question 6 options: 2. Suppose a company can select among two decisions (d1 and d2) and face three states of nature (s1, s2 and s3) with the following payoff table: Decision s1 s2 s3 d1 d2 150 200 200 50 200 500 The probabilities of s1, s2, and s3 are unknown. Using the conservative approach, what is the optimal decision and what is the value of the payoff? Place the optimal decision in the first answer box and the maximum payoff used to derive this solution in the second. Question 7 options: 8 3. Suppose a company must consider two…ule_item_id=5186850 vas UCLA Undergraduate Ed... ww Alternative formats UIT Email uclaKB 20. Individuals with initial wealth $100 and different preferences over risk are considering purchasing a lottery ticket for $10. The lottery pays $20 with 50% probability, and nothing otherwise. Consider the following statements: (a) No statement is correct. (b) Only I is correct. (c) Only II is correct. (I) The certainty equivalent of this gamble is higher for the risk-averse individuals, compared to risk-neutral individuals. UCLA Campus Dir... (II) The expected wealth after purchasing the ticket is higher than without purchasing it. (III) The certainty equivalent of purchasing the lottery ticket is $100 for risk-neutral individuals. 9 (d) Only III is correct. (e) More than one statement is correct. 8 Support staff by S... UCLA Evaluation Ca Information for the next two questions: In a used car market, there are 10 identical buyers, each wanting to buy one car. There are 10 non-identical sellers…
- 2 Consider the two investments listed below with possible outcomes and probabilities: INVESTMENT (in $1000) SAFE RISKY INVESTMENT AMOUNTⓇ 40+ 40+ GOOD SCENARIO OUTCOME 45+ 80+ AVERAGE+ SCENARIO PROB OUTCOME 0.40* 0.40€ 42+ 45+ BAD+ SCENARIO PROB OUTCOME PROB 0.20 35+ 0.20 10+ 0.40€ 0.40+ b) a) Suppose I have utility function U(*) = (x)2. What is the expected utility from each investment? Which investment will I choose, if any? Show and explain your work and provide the intuition. c) What is the value of the risk premium for the SAFE investment? Show and explain your work and provide the intuition. d) What is the value of the risk premium for the RISKY investment? Show and explain your work and provide the intuition.< +d. Use expected utility to make a recommended decision. e. Should the decision maker feel comfortable with the final decision recommended by the analysis?Problem Solving. Solve the following problems completely. 2. You have identified two risks with a 18% and a 25% chance of occurring. They willcost you P50,000 and P98,000 if both risks happen.a. What is the expected monetary value of the first event?b. What is the expected monetary value of the second event?