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There are two types of drivers, high-risk drivers with an accident probability of 2=3 and low risk drivers with an accident probability of 1=3. In case of an accident the driver suffers a loss of 1. The initial wealth of both types of drivers is 2. Both types are expected utility maximizers with utility index u(z) = ln z.
(i) what is the maximum insurance premium that each type would be willing to pay to fully insure their accident risk?
(ii) there is an equal number of drivers of both types so that the overall accident prob- ability is 1=2. Assume that the government offers an insurance contract that has a premium of 1=2 and covers the full cost of the accident. Would the low risk types accept this contract?
(iii) Now assume that the government offers a full coverage contract that has a premium of 2=3 and a partial coverage contract with coverage C and premium C=3. Write down the inequality that must be satis?ed to ensure that high-risk types prefer the full coverage contract over the partial coverage contract.
You will recall the function pnorm() from lectures. Using this, or otherwise, Dteremine the probability of a standard Gaussian random variable exceeding 1.3. Using table(), or
Weighted Harmonic Mean Weighted Harmonic Mean is calculated with the help of the following formula: WHM Case
To use Linear Programming for solving the following inequalities. Following Twin Conditions (as mandated by the Indian Regulatory Authority) Twin Condition I for TV Broadcasters
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Henry Kaiser suggested a rule for selecting a number of components m less than the number needed for perfect reconstruction: set m equal to the number of eigenvalues greater than I
Q. Compute the output of correlation? The following figure shows (a) a 3-bit image of size 5-by-5 image in the square, with x and y coordinates specified, (b) a Laplacian
The Elementary Teachers' Federation of Ontario make the following claim on their website as of February 13, 2013: For years, the Elementary Teachers' Federation of Ontario (ETFO
You are going to purchase a part from a specialty vendor. Your company needs a C p of at least 1.67 on a critical dimension of the part. The dimensional specification for this p
what do we mean by critical region
Using Chi Square Test when more than two Rows are Present To understand this, let us consider the contingency table shown below. It gives us the information about the stage
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