1. A property development company takes on one new project each year, investing all of its capital in that year’sproject. If the project is successful, the company makes a profit of $1million. If the project is unsuccessful,the company is ruined (loses all its money) and ceases to exist. The success or failure of each project isindependent of all previous ones. The probability that a project is unsuccessful when x million dollars isinvested (for x = 1, 2, 3, . . .) is 1/(x + 1) 2 . Let X n million dollars be the company’s total capital after nprojects.(a) Write down the transition probabilities for the Markov chain (X n ).(b) Show that when X 0 = i, the probability h i of eventual ruin is 1i+1

The probability is .99 that a 30-year-old man will survive one year. An insurance company offers to sell a man P150,000.00 one-year term life insurance policy at a premium of P2,200.00. What is the company’s expected gain?

Dougie’s car is worth $10,000. Dougie is a careless fellow who leaves the top down, thekeys in the ignition, and his fanny pack in the front seat. As a result, the probability of his carbeing stolen is 0.3. If his car is stolen, he will never get it back (the fanny pack is a knockoff,assume that it has a value of zero). Dougie has $20,000 in other wealth and his utility functionfor wealth is 𝑢(𝑤) = 2𝑤^0.5. Suppose that Dougie can buy $K worth of insurance at a price of$.35K a) Write down Dougie’s von Neuman-Morgenstern utility function. (u(c1, c2, π1, π2) = π1ν(c1) + π2ν(c2))

The chance of losing money on an investment is referred to as _______.corporationriskprofitsnone of the above

Insurance: An insurance company sells a 1-year term life insurance policy to an 83-year-old man. The man pays a premium of $4700. If he dies within 1 year, the company will pay $82,000 to his beneficiary. According to the U.S. Centers for Disease Control and Prevention, the probability that an 83-year-old man will be alive 1 year later is 0.9437. Let X be the profit made by the insurance company.Part: 0 / 20 of 2 Parts CompletePart 1 of 2(a) Find the probability distribution.The probability distribution isx 82000 4700Px

A company invests in a risky project that promises $100,000. It might also earn nothing. The probability of the project’s success is 10%. The company invests $10,000 in the project. Which of the following statements is TRUE? a. The absolute risk premium is $10,000. b. The company is risk-averse. c. The relative risk premium is 10% d. The company is risk-neutral.