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Answer:
Mary's risk premium is $0.9375
Step-by-step explanation:
Mary's utility function,
Mary's initial wealth = $100
The gamble has a 50% probability of raising her wealth to $115 and a 50% probability of lowering it to $77
Expected wealth of Mary,
= (0.5 * $115) + (0.5 * $77)
= 57.5 + 38.5
= $96
The expected value of Mary's wealth is $96
Calculate the expected utility (EU) of Mary:-
The expected utility of Mary is $9.75
Mary will be willing to pay an amount P as risk premium to avoid taking the risk, where
U(EW - P) is equal to Mary's expected utility from the risky gamble.
U(EW - P) = EU
U(94 - P) = 9.63
Square root (94 - P) = 9.63
If Mary's risk premium is P, the expected utility will be given by the formula:
Mary's risk premium is $0.9375
The value of k to the nearest integer is 21
- Let the number of international tourist arrivals in Russia in 2011 be k
If the number of international tourist arrivals in Russia in 2012 was 13.5% greater than in 2011 will be expressed as:
k = 24.7 - (13% of 24.7)
k = 24.7 - (0.135 * 24.7)
k = 24.7 - 3.3345
k = 21.3655
Hence the value of k to the nearest integer is 21
Learn more on decrement here: brainly.com/question/24304697
