Determine which of the options has the highest risk

Assignment Help Econometrics

Reference no: EM13212872

Cameron is an investor trying to decide among the following three different investment options. Option A: Price today: $1000 One year from today Cameron will receive one of the following payments: $1,250 with a probability of 90% $1,000 with a probability of 8% $0 with a probability of 2% Option B: Price today: $1000 One year from today Cameron will receive one of the following payments: $4,000 with a probability of 30% $1,000 with a probability of 50% $0 with a probability of 20% Option C: Price today: $1000 One year from today Cameron will receive one of the following payments: $2,000 with a probability of 33% $1,000 with a probability of 34% $0 with a probability of 33%

a. What is the expected value (payment) of each of the options at the end of the year?

b. Which of the options has the highest risk? Why?

c. If Cameron is a risk neutral inventor, which option will be selected? d. How would your answer change if Cameron is a risk adverse investor?

Reference no: EM13212872

Questions Cloud

Determine the velocity of each block : Block A has a mass of 3 kg and B has a mass of 5 kg. If the system is released from rest, determine the velocity of each block in t=4s. Neglect the mass of the pulleys.

Explain how should the input combination be adjusted : Hernandez Corp. uses two variable inputs, X and Y, to produce its final product, canoes. Its engineering department has estimated the marginal product functions for inputs X and Y as follows: MPx = Y/X MPy = 4 X/Y Where X and Y denote.

Explain attractive interaction among the molecules of a gas : attractive interaction among the molecules of a gas are more important than repulsive interactions, it's fugacity coefficient is less than

Determine the electric flux through this surface : A uniform linear charge density of 4 nC/m is distributed along the entire x axis. Consider a spherical (radius = 5 cm) surface centered on the origin. Determine the electric flux through this surface.

Determine which of the options has the highest risk : Cameron is an investor trying to decide among the following three different investment options. Option A: Price today: $1000 One year from today Cameron will receive one of the following payments: $1,250 with a probability of 90% $1,000 with a pro..

Calculate the mass of mixture produced at the mixing stage : calculate the mass of mixture produced at the mixing stage, the mass jam produced from the kettle and the mass od water evaporated from the kettle.

Explain the anti-periplanar newman projection : Write the anti-periplanar Newman Projection for the first step of the elimination. Using this conformation, be sure to write the correct geometry of the resulting intermediate

Specify a diameter d using a design factor of nd : xerted on the shaft shown in the figure, which rotates at 1150 rev/min and supports a 10-kip bending force. Use a 1095 HR steel. Specify a diameter d using a design factor of nd = 1.6 for a life of 3 min. The surfaces are machined.

Explain the entropy of the systems plus surroundings : If 300kJ of heat are exchanged between the system at -5degrees C and its surroundings at 30degrees C, the entropy of the systems plus

User Account

All Pages