100BMT1S11_FR_answers-1

100BMT1S11_FR_answers-1 - Free response – 25 out of 50...

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Unformatted text preview: Free response – 25 out of 50 pts. (2 qns., 12 pts. each + 1) Answer these questions on your exam paper in the space provided. Show your work and intermediate steps for partial credit. You will not be given credit for correct answers without any work or explanation. Points are split equally across all sub-parts. You will receive 1 extra point for correctly writing your name, perm number, and TA’s name in the appropriate place on the first page of the exam paper. 1. Ashfia has a block of uranium worth [versions A and C: $100; versions B and D: $200], but with probability one-third, half of the block will decay into worthless lead, leaving her with only [versions A and C: $50; versions B and D: $100] of uranium. Let c d and c nd be her respective wealth if the uranium decays and doesn’t decay, respectively. (a) If a dollar of insurance coverage costs p = 1 / 3, what is Ashfia’s state-contingent budget con- straint? (Write your answer as the equation of a line, with c nd isolated on the left, written as a function of c d .) A and C answer: c nd = 125 − c d 2 ; B and D answer:...
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100BMT1S11_FR_answers-1 - Free response – 25 out of 50...

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