Question 1

Expected utility is:

Accepted Answer

A)  the profit from a given decision. 
B)  a probability weighted average of possible profits. 
C)  an evenly weighted average of possibility profits. 
D)  a probability weighted average of possible utility levels. 
E)  the expected profits plus a number that depends on risk. 
A)  the profit from a given decision. 
B)  a probability weighted average of possible profits. 
C)  an evenly weighted average of possibility profits. 
D)  a probability weighted average of possible utility levels. 
E)  the expected profits plus a number that depends on risk.

Question 2

Fred has a utility function U = 10P 0.5 and also has an investment opportunity that will pay 25 with probability 0.4 and 100 with probability 0.6.What is the certainty equivalent of this opportunity?

Accepted Answer

A)  64. 
B)  70. 
C)  80. 
D)  83.7. 
E)  None of the above. 
A)  64. 
B)  70. 
C)  80. 
D)  83.7. 
E)  None of the above.

Question 3

If  $\sigma$ is the standard deviation of a project with expected returns $100 and  $\sigma$2 = 4,the coefficient of variation is:

Accepted Answer

A)  1/25. 
B)  1/50. 
C)  $200. 
D)  $400. 
E)  $5,000. 
A)  1/25. 
B)  1/50. 
C)  $200. 
D)  $400. 
E)  $5,000.

Question 4

Thelma is indifferent between $100 and a bet with a 0.6 chance of no return and a 0.4 chance of $200.If U(0)= 20 and U(200)= 220,then U(100)= :

Accepted Answer

A)  88. 
B)  94. 
C)  100. 
D)  110. 
E)  132. 
A)  88. 
B)  94. 
C)  100. 
D)  110. 
E)  132.

Expected utility is:

Fred has a utility function U = 10P^0.5 and also has an investment opportunity that will pay 25 with probability 0.4 and 100 with probability 0.6.What is the certainty equivalent of this opportunity?

If $\sigma$ is the standard deviation of a project with expected returns $100 and $\sigma$ ² = 4,the coefficient of variation is:

Thelma is indifferent between $100 and a bet with a 0.6 chance of no return and a 0.4 chance of $200.If U(0)= 20 and U(200)= 220,then U(100)= :

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 14: Risk Analysis

Expected utility is:

Fred has a utility function U = 10P 0.5 and also has an investment opportunity that will pay 25 with probability 0.4 and 100 with probability 0.6.What is the certainty equivalent of this opportunity?

If σ\sigmaσ is the standard deviation of a project with expected returns $100 and σ\sigmaσ 2 = 4,the coefficient of variation is:

Thelma is indifferent between $100 and a bet with a 0.6 chance of no return and a 0.4 chance of $200.If U(0)= 20 and U(200)= 220,then U(100)= :

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Fred has a utility function U = 10P^0.5 and also has an investment opportunity that will pay 25 with probability 0.4 and 100 with probability 0.6.What is the certainty equivalent of this opportunity?

If $\sigma$ is the standard deviation of a project with expected returns $100 and $\sigma$ ² = 4,the coefficient of variation is: