Lucy, the manager of the medical test firm Dubrow Labs, worries about the firm being sued for botched results from blood tests. If it isn't sued, the firm expects to earn profit of $100, but if it is successfully sued, its profit will be only $50. Lucy believes that the probability of a successful suit is 20%. If fair insurance is available and Lucy is risk averse, how much insurance will she buy? (Hint: You may only be able to express your answer as an inequality.) Lucy will buy insurance that costs her $ response as a whole number.) when not successfully sued. (Enter your

Lucy, the manager of the medical test firm Dubrow Labs, worries about the firm being sued for botched results from blood tests. If it isn't sued, the firm expects to earn profit of $100, but if it is successfully sued, its profit will be only $50. Lucy believes that the probability of a successful suit is 20%. If fair insurance is available and Lucy is risk averse, how much insurance will she buy? (Hint: You may only be able to express your answer as an inequality.) Lucy will buy insurance that costs her $ response as a whole number.) when not successfully sued. (Enter your

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Titan completes a $300,000 life insurance application form with his insurance agent Esther. Esther informs him that the insurer will request an attending physicians' statement (APS). Titan inquires about the purpose of an APS. Which of the following is Titan's CORRECT response? Select one correct answer from the list 1. An APS is needed to obtain a summary of Titan's medical history. 2 An APS is needed to obtain a summary of Titan's family medical history. 3. 4. An APS is needed to obtain more information about Titan's lifestyle. An APS is needed to find out why Titan's driver's license was suspended. 000 0
Consider a worker, Janice, who has the option to purchase DI (disability insurance) on the private market. Janice becomes disabled with probability q = 0.01. She can purchase DI by paying the premium р. If the Janice is disabled, she will earn no income. But if she is insured, she will receive a total payment of $15,000 from the insurance company (her consumption will be $15,000). If the Janice is not disabled, she earns an income of $20,000. She has utility: U = 3C3 where C is the amount of consumption. Determine the actuarially fair insurance premium, p". Write down the expected utility function for Janice if she purchases insurance at the actuarially fair price. Will Janice choose to purchase this disability insurance? Explain. What is the most she would be willing to pay for DI insurance?
You have a friend, Icahn Betitall, who just started a small business. He ispaying a hefty premium for insurance. Icahn’s insurance agent told himthat he is insuring against the risk of loss on fire, theft, liability, and businessinterruption. Icahn also has policies for life, health, and automobiles. Icahnis planning a trip to Las Vegas. He plans to contact his agent and obtain apolicy on the risk of losing his money at the blackjack table.a. What should you tell Icahn about being able to purchase such a policy?b. What are several methods that Icahn can choose to manage his risk exposurein Las Vegas?
Rosa Valencia has a personal automobile policy (PAP) with coverage of $25,000/$50,000 for bodily injury liability, $10,000 for property damage liability that includes coverage for her vehicle, $5,000 for medical payments, and a $500 deductible for collision insurance. How much will her insurance cover in each of the following situations? Will she have any out-of-pocket costs? Rosa loses control when she swerves to miss a dog on the street, running into a parked car and causing $5,300 damage to the unoccupied vehicle and $3,750 damage to her own car. Rosa pulls out in front of another car and causes a serious auto accident, badly injuring three people. The injured parties win lawsuits against her for $35,000 for one individual, and the other two passengers claimed $5,000 each ($10,000 total). Rosa’s 16-year-old daughter borrows her car. She runs off the road when texting while driving and causes $450 damage to the car.
Suppose that Alex's benefit to the game is $128. Suppose further that Alex already bought a ticket (price of $80). Finally, suppose his non-refundable ticket has no resale value. Suppose that Alex's boss is considering paying a raise to Alex if he goes to work. Which of the following is true? (select all that apply) If Alex receives a $80 raise, then he will be indifferent between going to work and going to the game. If Alex does not get a raise, then he will definitely go to the game. If Alex receives a $60 raise, then he will NOT go to the game. I Alex receives a $100 raise then he will NOT go to the game.
Bill is cleaning his basement and finds an old vase. Believing the vase is worthless he sells it for $50.00. Later he discovers that the vase was really worth $25,000. Bill will be able to: A) recover $25,000. B) not recover anything because mistakes in judgement as to value do not permit you to avoid a contract. C) rescind the contract D) all of the above
Peter and Donald disagree on the interpretation of a business contract. Peter believes Donald owes him $20,000 and Donald believes he owes nothing. Each has been advised by his attorney that there is a 60% chance that Peter will prevail in a lawsuit. The cost of litigating the case will be $2,000 each. What is Peter's threat value?
II. Case Application. Answer the following situations by applying what you have learned from the previous discussions. A customer says, "Insurance is a waste of money. If and when I suffer a financial loss because of an accident or some other event, I can pay for it from my savings account." As an insurance agent your primary goal is to change this kind of mindset, how would you persuade this person to purchase insurance? Design a strategy. At 30, Alyssa Valdez invested P50,000 in a time deposit which earns 3% per annum. With the same interest rate, how much would her earnings be at age 35 if she reinvests the interest with the principal. Show your solution
Mary had a contract with Brick, whereby Brick will paint her Home for $2,000 TT. Brick regrettably got another job for a larger amount of money and told Mary that he cannot paint her house anymore. Mary is furious and has contacted her lawyer to sue Brick for breach of contract. Jeb contacted Mary soon thereafter and agreed to paint her house for $2,500 TT. Mary is however concerned that if she sues Brick, she may not be able to get any recourse via damages because she has not lost anything. Based on the rules of governing the payment of damages in the event of a breach of contract. Using IRAC please advise Mary on what she has to establish to be paid damages, clearly identifying each rule.
30. Gina has 250/500/50 liability insurance and $50,000 PIP insurance. Shechanges lanes too quickly, hits the metal guard rail, and the hits a tour bus.Four people are seriously injured hurt and sue her. Twenty others have minorinjuries. Gina's boyfriend, who was in the car, is hurt and requires $19,000worth of medical attention. What insurance covers this, and how much will thecompany pay? A. $19,000; BIB. $19,000; PIPC. $50,000; PIPD. $50,000; BI
A friend, explaining his position with respect to liability insurance, states, “I don’t feel I need the high limits of liability because I don’t make that much money. If I were a doctor or a lawyer, I would carry higher limits of liability coverage, but since I am not, the $100,000 minimum included in my homeowner’s policy is enough.” Do you agree or disagree? Why?
Tran has $225.43 left in his FSA. If he does not use the money within the next two months, he will lose it. He decides to buy prescription sunglasses for $178.27 and stock up on over-the-counter medication for $33.67. How much money, if any, will he forfeit?

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