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This is an expected value question but I don't even know where to begin.
"Suppose you have $10,000 to invest. A broker phones you with some information you requested on certain junk bonds. If the company issuing the bonds posts a profit this year, it will pay you a 40 percent interest rate on the bond. If the company files for bankruptcy, you will lose all you invested. If the company breaks even, you will earn a 10 percent interest rate. Your broker tells you there is a 50 percent chance that they will break even and a 20 percent chance that the company will file for bankruptcy. Your other option is to invest in a risk-free government bond that will guarantee 8 percent interest for 1 year.
a. What is the expected interest rate for the junk bond investment?
b. Which investment will you choose if your utility function is given by U = (M2) ?
c. Which investment will you choose if your utility function is given by U = (√M) ?
Suppose the own price elasticity of demand for good X is -3, its income elasticity is -3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 2. Determine how much the consumption of this good will chang..
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q1. if one defines incremental cost as the change in total cost resulting from a decision and incremental revenue as
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In a Terrystop context, if the explanation offered by the subject reasonably satisfies the officer that a crime is not occurring or has not already occurred, the officer:
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