Exercise 5: Insurance Consider two individuals, Dave and Eva. Both Dave and Eva have initial wealth 810; 000 and face a 40% chance of losing L = 450; 000. Dave has von Neumann-Morgenstern utility function uD(x) = x and Eva has von Neumann-Morgenstern utility function uE(x) = p x. 1. What do you know about Dave's and Eva's risk preferences? 2. What is the most Dave would be willing to pay for complete insurance against the loss? 3. What is the most Eva would be willing to pay for complete insurance against the loss? Suppose they are each able to choose insurance with any coverage level z 2 [0; 1] (i. e. 0 z 1). If an individual buys insurance coverage at level z, they will get reimbursed 450; 000z if the loss occurs. Insurance coverage at level z costs c(z) = z 200; 000. 4. What coverage level zD would Dave choose? Explain. 5. Based on your previous results, try to explain that Eva chooses a strictly positive coverage zE > 0. 6. Is Eva's optimal choice full insurance, i. e. zE = 1? ECON

While studying for the engineering economy final exam, you and two friends find yourselves craving a fresh pizza. you can't spare the time to pick up the pizza and must have it delivered. "pick-up-sticks" offers a 1-1/4-inch-thick (including toppings), 20-inch square pizza with your choice of two toppings for $15 plus 5% sales tax and a $1.50 delivery charge (no sales tax on delivery charge). "fred's" offers the round, deep-dish sasquatch, which is 20 inches in diameter. it is 1-3/4 inches thick, includes two toppings, and costs $17.25 plus 5% sales tax and free delivery. 1. what is the problem in this situation? state it in an explicit and precise manner. 2. systematically apply the seven principles of engineering economy (pp. 3-6) to the problem you have defined in part (a). 3. assuming that your common unit of measure is dollars (i.e., cost), what is the better value for getting a pizza based on the criterion of minimizing cost per unit of volume? 4. what other criteria might be used to select which pizza to purchase?

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During 2016, nike inc., reported net income of $3,760 million. the company declared dividends of $1,022 million. the closing entry for dividends would include which of the following? select one: a. credit cash for $1,022 million b. credit dividends for $1,022 million c. debit net income for $1,022 million d. credit retained earnings for $1,022 million e. debit dividends for $1,022 million