Your utility function is U = w0.4, where W is your wealth. Your current wealth is $800. There is a 25% chance that you will suffer a loss of $600. What is your expected utility? Round your answer to the nearest unit. Do not use dollar signs or commas.
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- Your utility function is U = wU.4, where W is your wealth. Your current wealth is $800. There is a 25% chance that you will suffer a loss of $600. What is your expected wealth? Round your answer to the nearest dollar. Do not use dollar signs or commas.Microeconomics Wilfred’s expected utility function is px1^0.5+(1−p)x2^0.5, where p is the probability that he consumes x1 and 1 - p is the probability that he consumes x2. Wilfred is offered a choice between getting a sure payment of $Z or a lottery in which he receives $2500 with probability p = 0.4 and $3700 with probability 1 - p. Wilfred will choose the sure payment if Z > CE and the lottery if Z < CE, where the value of CE is equal to ___ (please round your final answer to two decimal places if necessary)Your Utility function of U = 5, where I is income. You receive an income of 1600 each week from your laundry delivery service in which you face a 50% chance each week of an accident that costs you $700. Calculate your expected income and expected utility.
- 2. Alice believes that her car would cost £12500 to replace if it was stolen or damaged. Based on crime statistics for the area she lives in, she believes that the probability of her car being stolen or damaged is 0.15. (i) Alice's utility function is given by U(w) = ln(w) for w > 0 and she as £35000 in the bank. Calculate how much Alice would be prepared to pay (in a single payment) to insure her car against theft or damage (ii) Repeat the calculation in the previous part but now assume Alice has £500000 in the bank.35. Your current disposable income is $10,000. There is a 10% chance you will get in a serious car accident, incurring damage of $1,900. (There is a 90% chance that nothing will happen.) Your utility function is U = √√T, where I is income. If this policy is priced at $40, what is the change in your expected utility if you purchase the policy rather than no insurance? b) 0.8 c) 0.2 d) 03. Sarah's current disposable income is £90,000. Suppose there's a 1% chance that Sarah's house may be flooded, and if it is, the cost of repairing it will be £80,000, reducing her disposable income to £10,000. Suppose also that her utility function of income M is: U = VM (a)Calculate Sarah's expected income and expected utility given the risk of flooding. (b)For her to take an insurance that fully insures her in the event of house flooding, Sarah would have to pay a price for such an insurance, which would reduce her disposable income. What would be the minimum certain disposable income required for Sarah to take an insurance that fully insures her in the event of house flooding? Explain your answer.
- What is the expected return from an investment if there is a 20 percent chance of a 4 percent return, a 40 percent chance of a 8 percent return, and a 40 percent chance of a 12 percent returnUtility Theory You live in an area that has a possibility of incurring a massive earthquake, so you are considering buyingearthquake insurance on your home at an annual cost of $180. The probability of an earthquake damagingyour home during one year is 0.001. If this happens, you estimate that the cost of the damage (fully coveredby earthquake insurance) will be $160,000. Your total assets (including your home) are worth $250,000. A. Apply Bayes’ decision rule to determine which alternative (take the insurance or not) maximizes yourexpected assets after one year.Steve has received a stock tip from Monica. Monica has told him that XYZ Corp. will increase in value by 100%. Steve believes that Monica has a 25% chance of being correct. If Monica is incorrect, Steve expects the value of XYZ Corp. will fall by 50%. a. If Steve's utility of income is U(I)=50I. What is Steve's expected utility from buying $1,000 worth of XYZ Corp. stock? b. If Steve's utility of income is U(I)=I0.5. What is Steve's expected utility from buying $1,000 worth of XYZ Corp. stock?
- Hello can any one help with this Economics question: A contractor spends Dollar 3,000 to prepare for a bid on a construction project which, after deducting manufacturing expenses and the cost of bidding, will yield a profit of dollar 25,000 if the bid is won. If the chance of winning the bid is ten per cent, compute his expected profit and state the likely decision on whether to bid or not to bid?2. Ronald has $18,000. But he is forced to bet it on the flip of a fair coin. If he wins he has $36,000. If he loses he has nothing. Ronald's expected utility function is 0.5x0.5 + 0.5y0.5, where x is his wealth if heads comes up and y is his wealth if tails comes up. What safe income would make him exactly as well off as this bet?The Anderson family lives in the Arizona wilderness. Their property is at risk for being destroyed by a forest fire. It is estimated that each year the Anderson face a 5 percent probability of a $500,000 loss. The Anderson family has a utility function of U = W 0.7, where W is wealth and measured in dollars. Suppose their current wealth is $1 million. What is the family's expected loss from fire? What is the Anderson family's expected utility? What is the maximum value the Andersons will pay for insurance to completely protect their home? What is the risk premium?
