Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Question

Question

Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Table 1.

Column 1	Column 2 X	Column 3 Y
Profits ($1,000s)	Project A Probability (%)	Project B Probability (%)
$ 20	10	10
40	15	15
60	50	25
80	15	40
100	10	10

Use the mean – variance approach to compare prospects X and Y. Comment and explain which project dominates according to this criterion.
Use the probability criteria to compare prospects X and Y. Comment and explain which project dominates according to this criterion.
Assume the utility function of the decision – maker is u(w) = ln w, where w is wealth and ln is natural log. Use the expected utility approach to tell which project dominate according to this criterion.

math Statistics-And-Probability

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Add a comment

Answer 2

Similar Homework Help Questions

A firm is considering two projects, A and B, with the probability distributions of profits presented...

A firm is considering two projects, A and B, with the probability distributions of profits presented in the first three columns of Table 1. Denote the profit of project A as random variable X, and its distribution functions as F(x). Denote the profit of Project B, as random variable Y, distribution function G(y). Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%) Project B Probability (%) $ 20 10 10 40 15 15...
Table 1 Column 1 Column 2 Column 3 Profits S1,000s) Project A Probability (% 10 Project...

Table 1 Column 1 Column 2 Column 3 Profits S1,000s) Project A Probability (% 10 Project B Probability (% S 20 10 40 15 60 50 25 80 40 100 10 10 1.1 Find the expected value, and the standard deviation of X and Y 1.2 Find the distribution functions of Project A (F(x), and Project B (G(x)) 1.3 Find the probability that profits of Project A are less than or equal to $40,000. That is P(XS40) 1.4 Find the...
A person with the following utility function, u(x) = ln(x) faces a world where with probability...

A person with the following utility function, u(x) = ln(x) faces a world where with probability 0.1 will suffer of identity theft which will reduce their wealth from $250000 to $100000. This means that we can write: E{u(.)] = 0.91n(x) +0.1ln(y) where x would be the wealth under no identity theft and y the wealth under identity theft. This means that the marginal utilities are: MU 0.9, MUy = 0.1 Using this information answer the following questions 1) What is...

A person with the following utility function, u(x) In(x) faces a world where with probability 0.1...

A person with the following utility function, u(x) In(x) faces a world where with probability 0.1 will suffer of identity theft which will reduce their wealth from $250000 to $100000. This means that we can write: Eu(.0.91n(x)+0.1n(y) where would be the wealth under no identity theft and y the wealth under identity theft This means that the marginal utilities are: MU0.9 MUy = 0.1 Using this information answer the following questions 1) What is this persons attitude towards risk? explain...
Consider the following utility function of 2 goods, x and y: U(x,y)= - [(x-10)2 + (y-10)2];...

Consider the following utility function of 2 goods, x and y: U(x,y)= - [(x-10)2 + (y-10)2]; x,y≥0 The prices of good x and y is 10 and 20 respectively. The income is denoted by m. a. Draw the indifference curves for the utility function and use arrows to explain in which direction utility increases or decreases. b. Find the consumption bundle that maximizes utility for the consumer. c. Find the Engel curve.
Matlab! Use Matlab to calculate array X and array Y. The first column is time (1,...

Matlab! Use Matlab to calculate array X and array Y. The first column is time (1, 2, 3 ...), and the second column is value (0 and 1). When the value of array X is 0, the value of array Y is itself at the same time. When the value of array X is 1, the value of array Y will become the value of the previous Y(i-1) The data of the array is given, just how to change the...

1. a. Two investors, A and B, are evaluating the same investment opportunity, which has an expected value of £100. The u...

1. a. Two investors, A and B, are evaluating the same investment opportunity, which has an expected value of £100. The utility functions of A and B are ln(x) and x2, respectively. Which investor has a certainty equivalent higher than 100? Which investor requires the higher risk premium? b. (i) Describe suitable measures of risk for ‘loss-aversion’ and ‘risk aversion’. (ii) Concisely define the term ‘risk neutral’ with respect to a utility function u (w), where w is the realisation...
(d) Find the probability mass function of X given Y = 3 (ie, p(x|y = 3))...

(d) Find the probability mass function of X given Y = 3 (ie, p(x|y = 3)) 7. (10 points) Consider two jars, Jar M and Jar W. In Jar M, there are 3 balls numbered 0, 1, 2. In Jar W there are 3 balls numbered 1, 2, 3. A ball is drawn from Jar M, then a ball is drawn from Jar W. Define M as the number on the ball from Jar A and W the number on...
Consider two investments X and Y, where X pays $0 and $10 with equal probability and...

Consider two investments X and Y, where X pays $0 and $10 with equal probability and Y pays 0 with probability 0.75 and $20 with probability 0.25. What investment would an investor choose if her utility function is ux=x2 ux=x ux=1-e-x10 Consider an insurance market with insurance firms being competitive and risk neutral (Zero expected profits in equilibrium) and a risk averse customer with a von-Neumann Morgenstern utility function ux=x1/3. The customer is born with a wealth of $150. There...

please asap 3. The table to the right shows the values of the joint probability distribution of the discrete random variables X and Y Find the cov(X, Y). ơxy- 11-u,' y. 0 0 1/12 1/6 1/24 7/2...

please asap 3. The table to the right shows the values of the joint probability distribution of the discrete random variables X and Y Find the cov(X, Y). ơxy- 11-u,' y. 0 0 1/12 1/6 1/24 7/24 1|¼ ¼ 1/40121/4。 2 Y 2 1/8 1/20 7/40 1/120 3 1/120 7/15 7/15 1/15! 3. The table to the right shows the values of the joint probability distribution of the discrete random variables X and Y Find the cov(X, Y). ơxy- 11-u,'...

Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Homework Answers

Add Answer to:
Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Post as a guest

Earn Coins

A firm is considering two projects, A and B, with the probability distributions of profits presented...

Table 1 Column 1 Column 2 Column 3 Profits S1,000s) Project A Probability (% 10 Project...

A person with the following utility function, u(x) = ln(x) faces a world where with probability...

A person with the following utility function, u(x) In(x) faces a world where with probability 0.1...

Consider the following utility function of 2 goods, x and y: U(x,y)= - [(x-10)2 + (y-10)2];...

Matlab! Use Matlab to calculate array X and array Y. The first column is time (1,...

1. a. Two investors, A and B, are evaluating the same investment opportunity, which has an expected value of £100. The u...

(d) Find the probability mass function of X given Y = 3 (ie, p(x|y = 3))...

Consider two investments X and Y, where X pays $0 and $10 with equal probability and...

please asap 3. The table to the right shows the values of the joint probability distribution of the discrete random variables X and Y Find the cov(X, Y). ơxy- 11-u,' y. 0 0 1/12 1/6 1/24 7/2...

Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Homework Answers

Add Answer to: Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...

Post as a guest

Earn Coins

Add Answer to:
Table 1. Column 1 Column 2 X Column 3 Y Profits ($1,000s) Project A Probability (%)...