Problem Set 1

5 each investment 2 pays 200 with probability 0125 0

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Unformatted text preview: purchase an insurance policy that costs $2000 and covers all accident costs? Justify. ! Would you want to purchase an insurance policy that costs $3000 and covers all d) accident costs? Justify. Question 4. Consider the following investments. Investment 1 pays either 100 or  ­100 with probability 0.5 each. Investment 2 pays 200 with probability 0.125, 0 with probability 0.75, or  ­200 with probability .125. a) Calculate the mean and...
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