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Paraphin [41]
2 years ago
10

Investor A has an initial wealth of $100 and a utility function of the form: U(w) = log(w) where w is her wealth at any time. In

vestment Z offers her a return of −18% or +20% with equal probability. i. What is her expected utility if she invests nothing in Investment Z? ii. What is her expected utility if she invests entirely in Investment Z? iii. What proportion a of her wealth should she invest in Investment Z to maximize her expected utility? What is her expected utility if she invests this proportion in Investment Z?
Business
1 answer:
stepladder [879]2 years ago
5 0

With this initial investment of 100, the investors utility if she invests nothing is 2. If she invests entirely her utility is 2.00432

From the available question, these are the the solutions from option (i) to (iii)

i.) We have utility defined as

U(w) = log w

w = 100

Utility=log(100)

= 2

ii) If she invests entirely in Z, utility:

return*probability\\

-18% x 50% =  -9%

20% x 50% = 10%

-9% + 10% = 1%

w = 100 + 1

= 101

Utility = log(101)

= 2.00432

This is her utility if she invests entirely in Z.

iii) This investor has these two choices:

  • invest in z
  • leave resources idle

If she invests in z she gets a 1% increase. Therefore her wealth increases or is maximum when she invests in Z.

Her utility if she invests this proportion in Z is the same as what was solved in (ii) above.

Read more on brainly.com/question/4203540?referrer=searchResults

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Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs
pychu [463]

Answer:

Increase in income= $2,965.6

Explanation:

Giving the following information:

Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is:

Materials $ 12,036

Labor 35,400

Variable overhead 23,128

Fixed overhead 47,200

Total $117,764

McGee Corporation offers Gruden $4.91 per disc for 4,930 discs. If Gruden accepts the offer, its fixed overhead will increase from $47,200 to $53,700 due to the purchase of a new imprinting machine.

Total variable cost= (12,036 + 35,400 + 23,128)= 70,564

Unitary variable cost= 70,564/23,600= $2.99

Increase in fixed costs= $6,500

Increase in income= (4930*4.91) - (4930*2.99) - 6500= $2,965.6

8 0
3 years ago
Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upco
inessss [21]

Answer:

<u>Over Applied Overhead      = $ 4000</u>

Actual Manufacturing Overhead = $45,000

Manufacturing Overhead Applied = $ 49,000

Explanation:

                                          Job 101        Job 102        Job 103

Total Direct materials      $ 19,200     $ 14,400       $ 9,600       $ 43,200

Direct labor                    $ 28,800       $ 11,200        $ 9,600      $ 49,600

Machine hours              1,000 hrs        4,000 hrs      2,000 hrs   7,000 hours

<u>Manufacturing overhead   $ 7000       $ 28,000      14,000 </u>

<u>Total                                $ 55,000         53,600        33,200</u>

Actual overhead costs recorded during the first month of operations totaled $45,000.

<u>Journal Entries </u>

<u>Sr. No                    Particulars                 Debit                   Credit</u>

Job 102              Finished Goods           53,600

                           Work In Process                                     53,600

A journal entry showing the transfer of Job 102 into Finished Goods Inventory upon its completion.

Job 101                Sales                         60,000

                        Cost Of Goods Sold                              60,000

Journal entries to recognize the sales revenue and cost of goods sold for Job 101.

Job 101              Cost of Goods Sold        55,000

                          Finished Goods Inventory                  55,000

Manufacturing Overhead Applied =   $ 7000 + $ 28,000+14,000 = $ 49,000

Job 101 = 1000/60,000 * $ 420,000= $ 7000

Job 102 = 4000/60,000 * $ 420,000= $ 28000

Job 103 = 2000/60,000 * $ 420,000= $ 14000

Actual Manufacturing Overhead = $45,000

<u>Over Applied Overhead      = $ 4000</u>

                                   

      Manufacturing Overhead  Accounts $ 4000  debit                  

              Cost of Goods Sold          $ 4000 Credit

Entry to transfer the balance of the Manufacturing Overhead account to Cost of Goods Sold.

(Entry to reduce the amount of Over applied Overhead)                                

                         

6 0
3 years ago
Cindy is taking out a loan today. The cash amount that she will receive today is equal to the present value of the lump sum paym
Alexxandr [17]

Answer:

Option E, PURE DISCOUNT.

Explanation:

There are different types of loan, some are; principal only loan, interest only loan, amortized loan, compound loan, pure discount loan...

A pure discount loan is a loan in which the borrower receives money today and repays a single lump at some time in future. It is the simplest form of loan.

Practically, it means the borrower will not pay any interest over the years; instead the interest is earned when the loan is paid back at maturity.

For example, imagine you wanted to borrow $20,000 and pay back twelve months later. The interest and charges came to $2,000, you would receive $18,000 from the lender. But, you would still have to pay back the whole $20,000.

Therefore, since Cindy will be paying a lump sum equal to the cash amount she received today, it means that the lender already calculated the interest and other related charges and then discounted it from the face amount thereby making it equal at the point of repayment. The option that best suits the question is E, the type of loan PURE DISCOUNT.

6 0
3 years ago
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Likurg_2 [28]

Answer: economy of scale

Explanation:

8 0
2 years ago
Rankings as well as word of mouth from satisfied customers drive additional sales for automotive companies. However, because thi
Novay_Z [31]

Answer:

a. sales orientation

Explanation:

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Therefore as per the given situation, it is mentioned that there is a lack of understanding with respect to the customer wants and need

So this represents the sales orientation

hence, the correct option is a.

3 0
3 years ago
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