EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 4.3, Problem 2MQ
To determine
The reason behind choosing single feed lines at banks rather than lines for tellers considering the diversification of risk involved.
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A manager must determine which of two products to market. From market studies, the manager constructed the following payoff matrix of the present value of all future net profits under all the different possible states of the economy:
State of the economy
Product 1
Product 2
Probability
Profit ($)
Probability
Profit ($)
Boom
0.2
50
0.2
30
Normal
0.5
20
0.4
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Recession
0.3
0
0.4
10
The manager’s utility function for money is
U = 100M – M2
where U is the total utility of money (in utils) and M refers to the dollars of profit.
Determine if this manager a risk seeker, risk neutral, or a risk averter. Explain your answer.
If the manager’s objective was profit maximization regardless of risk (أي دون أخذ المخاطرة بعين الاعتبار), which product should the manager introduces? Explain your answer.
Evaluate the risk associated per dollar of profit with each product, i.e. find the coefficient of variation for each project.…
As it captures the sensitivity the price of a financial asset with respect to the fluctuations of the cost of capital, duration can be thought of as a measure of risk, albeit a conditional one. Coherent risk measures should satisfy four conditions, listed on page 260 of your textbook. Show if and how duration satisfies those four conditions
D7
You run an oil company that wants to extract an oil reserve. The total stock of oil in the reserve is 600 barrels. You must sell all of the oil in two time periods, so the quantity extracted
will be q1 +q2 = 600. The price per barrel you can sell the oil for is pt = 710 − 1 2 qt in each period. The cost of extracting a single barrel is not constant, but increases as more oil is extracted in a period, c(qt) = 1 2 qt. If the interest rate is 5%, how much oil will you extract in periods 1 and 2 if you wanted to maximize profits.
Chapter 4 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 4.1 - Prob. 1MQCh. 4.1 - Prob. 2MQCh. 4.1 - Prob. 3MQCh. 4.2 - Prob. 1TTACh. 4.2 - Prob. 2TTACh. 4.2 - Prob. 1MQCh. 4.3 - Prob. 1TTACh. 4.3 - Prob. 2TTACh. 4.3 - Prob. 1MQCh. 4.3 - Prob. 2MQ
Ch. 4.3 - Prob. 3MQCh. 4.3 - Prob. 1.1TTACh. 4.3 - Prob. 1.2TTACh. 4.3 - Prob. 2.1TTACh. 4.3 - Prob. 2.2TTACh. 4.3 - Prob. 1.1MQCh. 4.3 - Prob. 2.1MQCh. 4.3 - Prob. 3.1MQCh. 4.4 - Prob. 1TTACh. 4.4 - Prob. 2TTACh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQCh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Prob. 4.4PCh. 4 - Prob. 4.5PCh. 4 - Prob. 4.6PCh. 4 - Prob. 4.7PCh. 4 - Prob. 4.8PCh. 4 - Prob. 4.9PCh. 4 - Prob. 4.10P
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