Jack has two options next year, Job A and Job B. The earnings in the two jobs differ and arerandom. In Job A, earnings will be $25 with probability 1/2, $36 with probability 1/6, or $81 withprobability 1/3. In Job B, earnings will be $36 with probability 2/3 or $64 with probability 1/3.If Jack has preferences over earnings given by u(e) = √e, where e denotes actual earnings,which job should he take and why?b. Calculate the Certainty Equivalents and risk premiums for Jack for both Job A and Job B.

Answered: Image /qna-images/answer/918ad64a-de66-4c0c-a846-fd8c95f706f6.jpg

Answered: Jack has two options next year, Job A…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Suppose that after the 2020 presidential election there are three races that are too close to call: Wisconsin,Michigan, and Pennsylvania. In order to become president, a candidate must receive 270 electoral votes ormore. Wisconsin has 10 electoral votes, Michigan has 16, and Pennsylvania has 20. Suppose that in theother decided races, Democrats have 259 electoral votes and Republicans have 233. The Democrat has an80% chance of winning Wisconsin, a 50% chance of winning Michigan, and a 10% chance of winningPennsylvania. A statistician defines a random variableXto be +1 if the Democrat wins,−1 if theRepublican wins, and 0 if neither candidate reaches 270 electoral votes. Find the probability densityfunction ofX. (Hint: Make this easier by figuring out the scenario in which the Republican wins or there isa tie!)
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