Reference no: EM131083597
a) What is the difference between moral hazard and adverse selection?
b) ?Car Depreciation problem: A common complaint is that a new car will depreciate by 25% as soon as the new owner drives it off the lot. This information comes from resale price data from cars sold just months after the initial purchase. How does adverse selection imply that most cars depreciate much less?
c) Samantha often forgets to lock her house. This has caused the probability of a burglary to be 30%. If her house gets broken into, she faces a property loss of $10,000, otherwise she gets to keep her $100,000. If Samantha is offered an insurance policy for her house to protect her from loss at $3,000, what is her expected wealth?
d) Both Nadia and Samantha are applying to insure their car against theft. Nadia lives in a secure neighborhood, where the probability of theft is 10%. Samantha lives in a lesser secure neighborhood where the probability of theft is 25%. Both Nadia and Samantha own cars worth $10,000, and are willing to pay $100 over expected loss for insurance. How much would Nadia be willing to pay for the insurance?
e) Tom wants to avoid any accidents on the work floor of his factory. If an accident does occur, it would cost him $500,000 in damages. Installing safety equipment would decrease the probability of an accident occurring from 20% to 10%. However, the equipment costs $20,000 to install. What is his expected loss after installing the safety equipment?
Local parks and urban public transportation systems
: In the text, we suggested that for well-off individuals with uniform taxation, preferences for education were not single-peaked. Why might preferences for local parks and urban public transportation systems (e.g., buses and subways) also not be singl..
|
How would you conduct a needs assessment
: How would you conduct a needs assessment to determine if new lenders are starting their jobs without the necessary knowledge and skills to perform well, and if the organization of the training curriculum (or another training issue) is responsible ..
|
Determine the formula of the complex
: Determine the formula of the complex.
|
What is the monthly interest rate
: One of the largest car dealers in the city advertises a 3-year-old car for sale as follows. Cash price $13,750, or a down payment of $1375 with 45 monthly payments of $361.23. Sharon bought the car and made a down payment of $2000. The dealer charged..
|
What is difference in moral hazard and adverse selection
: What is the difference between moral hazard and adverse selection? ?Car Depreciation problem: A common complaint is that a new car will depreciate by 25% as soon as the new owner drives it off the lot. This information comes from resale price data fr..
|
Present value of an annuity
: What is the present value of an annuity of $1,000 paid every year for five (5) years when the funds are received at the beginning of the year discounted at a rate of 9.0 percent.
|
Natural disaster struck certain area of the country
: Your reading on the topic of price controls should allow you to have some insights on certain situations that could emerge under stressful conditions. Imagine that a natural disaster struck a certain area of the country. Immediately basic goods such ..
|
Different types of knowledge processes
: Discuss the different types of knowledge processes within an organization that focus on the acquisition of new knowledge vs. those processes that build on existing knowledge. Then, discuss how these processes promote capability development in an o..
|
Name and briefly describe the organization that you serve
: Components of the strategic security plan - Using the core components that were outlined in the document linked above, devise a format, layout, configuration, or narrative map to identify the details of your selected organization as they fall withi..
|