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professor190 [17]
3 years ago
7

An individual has utility function U(x)=x1/4U(x)=x1/4 for salary, and is considering new job offer which pays $80,000 with a bon

us. The bonus will be $0, $10,000, $20,000, $30,000, $40,000, $50,000, or $60,000, each with equal probability. What is the certainty equivalent of this job offer?
Business
1 answer:
vladimir2022 [97]3 years ago
5 0

Answer:

108,280.22

Explanation:

Certainty equivalent is solved by taking the inverse utility function from the expected utility of a random wealth variable

U(x) = x^1/4

U^-1(x) = x^4

U^-1(x) === x^4

CE(x) = x^4

Salary   Bonus   Total income   U(x)= x^(1/4)       P(x)        U(x)*P(x)

80000       0          80000               16.82                1/7             2.4

80000    10000     90000               17.32                1/7            2.47

80000    20000    100000              17.78                1/7            2.54

80000    30000    110000               18.21                 1/7            2.6

80000    40000    120000              18.61                 1/7            2.66

80000    50000    130000              18.99                1/7            2.71

80000    60000    140000              19.34                1/7             <u>2.76</u>

Sum                                                                                             <u>18.14</u>

CE(x) =  18.14^4

CE(x) = 108280.22

So therefore,  the certainty equivalent of this job offer is 108,280.22

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A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard
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Answer: the options are listed below.

A. 18.45%

B. 17.67%

C. 23%

D. 19.76%

The correct option is D. 19.76%.

Explanation:

σ2p = (0.402)(0.352) + (0.602)(0.15)2 + (2)(0.4)(0.6)(0.35)(0.15)(0.45)

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σp = 19.76%

5 0
4 years ago
Two reasons why excellent customer service is important to every business
tamaranim1 [39]
1) Prevents business failure

About 96% of American businesses close their doors within 10 years. One of the contributing problems is poor customer service. Buyers become frustrated over small problems that are not addressed. It happens when a business does not have good customer service associates who follow up on questions and promptly fill requests.

2) Creates endorsements

Loyal customers provide positive endorsements and good online reviews that can help businesses strengthen their brand. A loyal customer, on average, is 10 times more valuable than their first purchase. Research shows that people often make purchasing decisions based on recommendations from family and friends vs. advertising messages. Here are four statistics:

About 97% of customers will tell others about very good or excellent customer service experiences.
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8 0
3 years ago
Bailey Co earns $12,117 of revenue on account and in $7,682 cash revenue transactions in Year 1. Cash collections of receivables
marshall27 [118]

Answer:

Cash inflows for  the year is $14,369.00  

Explanation:

Cash inflows in year comprise of the cash revenue and the portion on revenue on account(accounts receivable), received in the course of the year.

Cash revenue=$7,682

Cash collections in respect of accounts receivable= $6,687

Cash inflows during the year=$7,682+$6,687=$14,369.00  

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4 0
4 years ago
Imagine that a food critic visits your restaurant and writes a positive review that was then published in a magazine. This is an
BartSMP [9]

Answer:

Good Quality or Service

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This is a very general question however I’ll try to answer it to the best of my knowledge.

This is an example of Good Quality or Service OR Public Relations or Promotion.

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Public Relations or Promotion – Regardless of the food quality or the service at the Restaurant, the restaurant owner had paid the food critic/blogger to post good reviews about his/her Restaurant in the magazine which would attract more customers to this Restaurant.

In my opinion, Good Quality or Service is more relevant in this scenario.

3 0
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Answer:

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Not in        Manager New   Sales Rep          Sales Assistant

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