Suppose that a decision maker's risk attitude toward monetary gains or losses x given by the utility function U(x) = 
If there is a 10% chance that one of the decision maker's family heirlooms, valued at $5,000, will be stolen during the next year, what is the most that she would be willing to pay each year for an insurance policy that completely covers the potential loss of her cherished items?
What will be an ideal response?
The tree above shows the utility values, and we can use it to find the maximum premium to be used in the insurance branch that makes the decision maker indifferent by trial and error. Alternatively, we can calculate the expected utility for the no insurance branch using the utility function, 0.1*U(-5000)+0.9*U(0)=97.07 and then set the utility for the insurance branch, U(-premium) equal to that value and solve for the premium ($577.42).
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Explain the various ways that companies can expand internationally. List them in order of lowest to highest risk and investment.
What will be an ideal response?
Unrecognized prior service cost can be amortized based on which of the following methods?
a. Straight-line method using any systematic rational approach b. Straight-line method based on the average remaining service period of the qualified employees c. Interest method using the actuary's discount rate d. Service method based on the average remaining service period of the qualified employees
Which of the following statements comparing the NPV and IRR methods is false?
A) Both the NPV and IRR methods can be used for screening decisions. B) Only the NPV method can be used to compare investments of various size or magnitude. C) Both the NPV and IRR methods can take income tax effects into account. D) Both the NPV and IRR methods are used for long-term decision making.
When employees engage in a strike with unlawful means or an unlawful purpose, they are still legally protected and therefore may not be discharged by their employer
Indicate whether the statement is true or false