Susan is a self-employed consultant, earning $80,000 annually. She does not have health insurance but knows that, in a given year, there is a 5 percent probability she will develop a serious illness. If so, she could expect medical bills to be as high as $25,000. Susan derives utility from her income according to the following formula:
U = Y^(0.3), (i.e. Y raised to the 0.3 power), where Y is annual income.
a) What is Susan's expected utility?
b) What is her maximum willingness to pay for health insurance?
In: Economics
A pharmaceutical manufacturer forms tablets by compressing a granular material that contains the active ingredient and various fillers. The force in kilograms (kg) applied to the tablets varies a bit, with the N(11.4, 0.3) distribution. The process specifications call for applying a force between 11.3 and 12.3 kg. (a) What percent of tablets are subject to a force that meets the specifications? % (b) The manufacturer adjusts the process so that the mean force is at the center of the specifications, μ = 11.8 kg. The standard deviation remains 0.3 kg. What percent now meet the specifications? %
In: Statistics and Probability
A pharmaceutical manufacturer forms tablets by compressing a granular material that contains the active ingredient and various fillers. The force in kilograms (kg) applied to the tablets varies a bit, with the N(11.4, 0.3) distribution. The process specifications call for applying a force between 11.3 and 12.3 kg. (a) What percent of tablets are subject to a force that meets the specifications? % (b) The manufacturer adjusts the process so that the mean force is at the center of the specifications, μ = 11.8 kg. The standard deviation remains 0.3 kg. What percent now meet the specifications? %
In: Statistics and Probability
A pharmaceutical manufacturer forms tablets by compressing a granular material that contains the active ingredient and various fillers. The force in kilograms (kg) applied to the tablets varies a bit, with the N(12, 0.3) distribution. The process specifications call for applying a force between 11.2 and 12.2 kg.
(a) What percent of tablets are subject to a force that meets the specifications? %
(b) The manufacturer adjusts the process so that the mean force is at the center of the specifications, μ = 11.7 kg. The standard deviation remains 0.3 kg. What percent now meet the specifications?
In: Statistics and Probability
In: Statistics and Probability
In: Statistics and Probability
A bottling machine can be regulated so that it discharges an average of μ ounces per bottle. It has been observed that the amount of fill dispensed by the machine has a normal distribution A sample of n= 16 filled bottles is randomly selected from the output of the machine on a given day and the ounces of fill measured for each. The sample variance is equal to one ounce. Find the probability: a) that each bottle filled will be within 0.3 ounce of the true mean? b) that the sample mean will be within 0.3 ounce of the true mean?
In: Statistics and Probability
In: Finance
A student would like to determine whether the number of pages in a textbook can be used to predict its price. She took a random sample of 30 textbooks from the campus bookstore and recorded the price (in $) and the number of pages in each book. The least squares regression line is calculated to be ŷ = 83 + 0.3x.
Question 21 (1 point)
One textbook in the sample costs $120 and has a residual value of -32. How many pages are in this textbook?
Question 21 options:
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250 |
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240 |
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230 |
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220 |
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210 |
Question 22 (1 point)
Saved
Refer to the previous question. We conduct a hypothesis test to determine if there exists a positive linear relationship between number of pages and price of a textbook. The P-value is calculated to be 0.18.
What is the interpretation of this P-value?
Question 22 options:
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The probability that there is a positive linear relationship between number of pages and price is 0.18. |
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If there was a positive linear relationship between number of pages and price, the probability of observing a value of b1 at least as high as 0.3 would be 0.18. |
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If there was a positive linear relationship between number of pages and price, the probability of observing a value of β1 at least as high as 0.3 would be 0.18. |
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If there was no linear relationship between number of pages and price, the probability of observing a value of b1 at least as high as 0.3 would be 0.18. |
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If there was no linear relationship between number of pages and price, the probability of observing a value of β1 at least as high as 0.3 would be 0.18. |
In: Statistics and Probability
Use the following Information to Answer Problems 1 and 2
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Bradford Services Inc. (BSI) is considering a project that has a cost of $10 million and an expected life of 3 years. There is a 30 percent probability of good conditions, in which case the project will provide a cash flow of $9 million at the end of each year for 3 years. There is a 40 percent probability of medium conditions, in which case the annual cash flows will be $4 million, and there is a 30 percent probability of bad conditions and a cash flow of -$1 million per year. BSI uses a 12 percent cost of capital to evaluate projects like this. |
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Problem 1: Find the project’s expected cashflow and NPV
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Condition |
Probability |
Cash Flow |
Prob.*Cash Flow |
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Good |
0.3 |
$9 |
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Medium |
0.4 |
$4 |
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Bad |
0.3 |
-$1 |
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Expected CF |
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Expected CF = |
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T=0 |
T=1 |
T=2 |
T=3 |
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CF |
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NPV of Project = |
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What can you conclude regarding this project? |
Problem 2: find the project’s standard deviation and coefficient variation?
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Condition |
Probability |
NPV |
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Good |
0.3 |
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Medium |
0.4 |
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Bad |
0.3 |
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Expected NPV |
NPV of Project in Good Condition =
NPV of Project in Average Condition =
NPV of Project in Bad Condition =
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Variance = |
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Coefficient Variation = |
In: Finance