8. Individual Problems 20-4Suppose that every driver faces a 4% probability of an automobile accident every year. An accident will, on average, cost each driver $5,000. Supposethere are two types of individuals: those with $30,000.00 in the bank and those with $2,500.00 in the bank. Assume that individuals with $2,500.00in the bank declare bankruptcy if they get in an accident. In bankruptcy, creditors receive only what individuals have in the bank. Assume that bothtypes of individuals are only slightly risk averse.In this scenario, the actuarially fair price of full insurance, in which all damages are paid by the insurance company, is $Assume that the price of insurance is set at the actuarially fair price.At this price, drivers with $30,000.00 in the bank likelyv buy insurance, and those with $2,500.00 in the bank likelybuyinsurance. (Hint: For each typedriver, compare the price of insurance to the expected cost without insurance.)Suppose a state law has been passed forcing all individuals to purchase insurance at the actuarially fair price.True or False: The law will affect only the behavior of drivers with $2,500.00 in the bank.O FalseO True

Answered: Image /qna-images/answer/ccc9661b-697c-412a-8e24-6050a2e6ed50.jpg

Answered: 8. Individual Problems 20-4 Suppose…

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...

See similar textbooks

Similar questions

QUESTION 2 A rent-to-own agreement allows the renter to either return the merchandise after a specified period of time or apply the monthly payments toward purchasing the item(s) (or clearly, the renter could default on the agreement). A rent-to-own company reports that nationally 61% of the agreements result in the merchandise being returned, 30% of the agreements result in the merchandise being purchased, and the remaining agreements are defaulted on (consumer does not make required payments specified in the contract). At a local rent-to-own company, a sample of 221 agreements finds that 112 result in the merchandise being returned, 72 agreements result in the merchandise being purchased and the remaining agreements are defaulted upon. When testing (at the 5% level of significance) whether the proportions of the local company are different than the proportions nationally, what is the critical value (please round your answer to 3 decimal places)
Consider the following. My recent marketing idea, the Miracle Algae Growing Kit, has been remarkably successful, with monthly sales growing by 7% every 6 months over the past 4 years. Assuming that I sold 100 kits the first month, how many kits did I sell in the first month of this year? Determine the following values given that FV = PV(1 + i)", where FV and PV are measured in kits and time is measured in 6 month periods. PV = i = n = Solve for FV. (Round your answer to the nearest whole number.) FV = How many kits did I sell in the first month of this year? kits
QUESTION 2 Michelangelo buys a lot of pizza for himself and his three brothers, so he has procured a special credit card that will give him a 12% cash-back bonus on all pizza orders, as well as a 5% cash- back bonus on all soda orders. There are no other cash-back bonuses offered on Michelangelo's credit card, Suppose Michelangelo charged a total of $750 on his credit card this month, 70% of which was spent on pizzas and $20 of which was spent on soda. a. How much money did Michelangelo charge to his credit card for pizza this month? Answer: Work: b. What is Michelangelo's cash-back bonus this month? Answer: Work: QUESTION 3
QUESTION 8 Sam bought a house that costs $1,000,000. Sam got a 97% LTV loan. The lender demanded that Sam buy private mortgage insurance to insure the portion of the loan over 80% LTV. Suppose 5 years later, Sam's mortgage balance is $900,000. However Sam defaults and his house sells for $750,000 in a foreclosure auction. How much will the mortgage insurance company pay Sam's lender? O A. $170,000.00 O B. $250,000.00 OC. $150,000.00 O D. $220,000.00
1. Mr. Dela Cruz opens a barbershop business for the month of September. he looks and analyze his accounting records and he found out that in the middle of the month he already had a service income or earned P12,000, but when he checked his expenses by the end of the month it will reach up to P20,000 which includes; salary to his employees, payment for his rent, and water and electricity and other expenses. If Mr. Dela Cruz, wanted to have Php 10,000 profit (limpyo na kita), how much more he needs to earn by the end of the month? Give Mr. Dela Cruz some advice on how he will earn more for the next half of the month. *
Question 2 A payment by a corporation to its shareholders is called a: par value. coupon. dividend. stock split.
There is a 0.9984 probability that a randomly selected 31-year-old male lives through the year. A life insurance company charges $159 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 31-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.)
6) a. b. C. d. What is the present value of $15,000 received today, $2,500 received at the end of each of the next six years and $10,000 received at the end of the 7th year, assuming a required rate of return of 4.50% ? $38,143 $16,899.89 $29,990.22 $35,243
There is a 0.9991 probability that a randomly selected 33-year-old male lives through the year. A life insurance company charges $166 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 33-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $ The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.) b. If the 33-year-old male purchases the policy, what is his expected value? The expected value is $ (Round to the nearest cent as needed.) c. Can the insurance company expect to make a profit from many such policies? Why? because the insurance company expects to make an average profit of $ on every 33-year-old male it insures for 1 year. (Round to the nearest cent as needed.)
There is a 0.9986 probability that a randomly selected 27-year-old male lives through the year. A life insurance company charges $157 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $80,000 as a death benefit. Complete parts (a) through (c) below. a. From the perspective of the 27-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is $nothing. The value corresponding to not surviving the year is $nothing. (Type integers or decimals. Do not round.) b. If the 27-year-old male purchases the policy, what is his expected value? The expected value is $nothing. (Round to the nearest cent as needed.) c. Can the insurance company expect to make a profit from many such policies? Why? because the insurance company expects to make an average profit of $nothing on every 27-year-old male it…
There is a 0.9987 probability that a randomly selected 32-year-old male lives through the year. A life insurance company charges $197 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit Complete parts (a) through (c) below. a. From the perspective of the 32-year-old male, what are the monetary values corresponding to the two events of surviving the year and not surviving? The value corresponding to surviving the year is S The value corresponding to not surviving the year is $ (Type integers or decimals. Do not round.)
2. Suppose the probability a plant is destroyed in year 1 is 2% and the probability a plant is destroyed in year 2 assuming it was not destroyed previously is 4%. When the plant is destroyed, it would cost $249219 to replace. Assumed the interest rate is 5%, what is the expected replacement cost, round to nearest dollar? You'll need to find the expected cost each year and discount them at 5%.

SEE MORE QUESTIONS

Recommended textbooks for you

A First Course in Probability (10th Edition)

Probability

ISBN:

9780134753119

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability

Probability

ISBN:

9780321794772

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability (10th Edition)

Probability

ISBN:

9780134753119

Author:

Sheldon Ross

Publisher:

PEARSON

A First Course in Probability

Probability

ISBN:

9780321794772

Author:

Sheldon Ross

Publisher:

PEARSON

SEE MORE TEXTBOOKS