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Kisachek [45]
2 years ago
12

Lottery – Let $1,000 be your current wealth. There are 100 people and each buys a lottery ticket at $5. The administrative cost

of the lottery ticket per person is $5. If you win the lottery, you will get $500. There is only one person who can win the lottery. a. Define the gamble b. Calculate the expected value of the gamble c. Is this gamble favorable, fair, or unfavorable? d. Now, suppose your utility function is U = W5/2. Calculate the Certainty Equivalent and the maximum lottery price you are willing to pay. e. Now suppose that there are only 50 individuals participating in the lottery. Without calculating all the math again, what happens to the maximum price for the lottery you are willing to pay? Does it increase, decrease, or stay the same?
Business
1 answer:
MatroZZZ [7]2 years ago
6 0

Answer:

Kindly check explanation

Explanation:

Given that :

Initial wealth = $1000

Cost of lottery = $5

Winning = $500

Number of players or tickets = 100

Only one winner can emerge :

P(winning) = 1/100

P(Not winning) = 1 - 1/100 = 99/100

P __ 1/100 _________ 99/100

X : [1000 + (500-5)] ___ (1000-5)

P(X): ____1/100 _______ 99/100

X : _____ 1495 _________995

Expected value E(x) :

E(X) = ΣX*p(x) = (1/100)*1495 + (99/100)*995 = 1000

C.)

Possible winning = $500 ; p(x) = 1/100

Possible loss = - 5 ;p(x) = 99/100

500 * (1/100) = 5

-5 * (99/100) = - 4.95

Σ(5 + - 4.95) = 5 - 4.95 = 0.05

Hence, gamble is favorable since 0.05 > 0

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Western Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,0
topjm [15]

Answer:

$2,500

Explanation:

Opening balance                             $12,000

Cash receipts                                   $30,000

Cash disbursement                        ($34,500)

Closing balance                                $7,500

Minimum cash balance                    $10,000

Borrowing amount(1$0,000-$7,500)     $2,500

To maintain $10,000 cash balance western company need to borrow $2,500($10,000-$7500)

7 0
3 years ago
A fall in real GDP that results in a decrease in personal income tax receipts is an example of​ ______.
lyudmila [28]

Answer:

c. automatic fiscal policy 

Explanation:

Automatic fiscal policy are policies triggered automatically due to the state of the economy which causes either government spending or taxes to increase or decrease.

For example, if the economy is undergoing a downturn and real GDP falls, the amount paid as taxes would fall.

If the economy is booming and the real GDP rises, the amount paid as taxes would rise.

These are examples of automatic fiscal policies.

Discretionary fiscal policy is when the government purposely increases or reduces either its spending or taxes in response to the economic conditions.

I hope my answer helps you.

5 0
3 years ago
When we are doing the double entry for the closing inventory, why do we credit the inventory? I understand why we debit the clos
anastassius [24]

Answer:

Debiting in this case means to add to the inventory. Therefore, crediting means that inventory was used up when closing inventory.

Explanation:

A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. ... A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account.

3 0
2 years ago
Investment X offers to pay you $4,020 per year for 12 years, whereas Investment Y offers to pay you $2,041 per year for 7 years.
inna [77]

Answer:

$16,481.68

Explanation:

Note that the present value of each yearly cash inflow can be determined using the formula provided below:

PV of cash inflow=cash inflow/(1+discount rate)^n

n is the year in which the cash inflow is expected, it is 1 for year 1 cash inflow, 2 for year 2 and so on.

PV of Investment X=$4,020/(1+11%)^1+$4,020/(1+11%)^2+$4,020/(1+11%)^3+$4,020/(1+11%)^4+$4,020/(1+11%)^5+$4,020/(1+11%)^6+$4,020/(1+11%)^7+$4,020/(1+11%)^8+$4,020/(1+11%)^9+$4,020/(1+11%)^10+$4,020/(1+11%)^11+$4,020/(1+11%)^12

PV of investment X=$26,099.27

PV of investment Y=$2,041/(1+11%)^1+$2,041/(1+11%)^2+$2,041/(1+11%)^3+$2,041/(1+11%)^4+$2,041/(1+11%)^5+$2,041/(1+11%)^6+$2,041/(1+11%)^7

PV of investment Y=$9,617.59  

the difference in PV=$26,099.27-$9,617.59

the difference in PV=$16,481.68  

5 0
3 years ago
Before coming to trial, sam was assigned a public defender, was informed of the charges, and was given a chance to review the ev
andreyandreev [35.5K]

Procedural justice.

All the above activities are part of procedural justice which entails ensuring that there is fairness in the processes that resolve disputes particularly in regard to legal proceedings in criminal justice. The aim of procedural justice is to ensure a fair trial.

7 0
3 years ago
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