Exam 11: Time and Uncertainty

Suppose Jack and Kate are at the town fair and are choosing which game to play.The first game has a bag with four marbles in it-1 red marble and 3 blue ones.The player draws one marble from the bag; if it is red,they win $20 and if it is blue,they win $1.The second game has a bag with 10 marbles in it-1 red,4 blue,and 5 green.The player draws one marble from the bag; if it is red,they win $20; if it is blue,they win $5; and if it is green,they win $1.Both games cost $5 to play.Jack decides to play the first game,and Kate decides to play the second game as described in the scenario.The expected value of the payoff:

Investing in things with unrelated risk is:

Economists believe that individuals:

Risk pooling:

Risk pooling:

Someone is considered to exhibit risk-seeking behavior if he:

The amount of interest owed on a loan of $100,000 after a year at an interest rate of 3 percent is:

The present value of $500,000 in 4 years at 7 percent interest is approximately:

Suppose Jack and Kate are at the town fair and are choosing which game to play.The first game has a bag with four marbles in it-1 red marble and 3 blue ones.The player draws one marble from the bag; if it is red,they win $20 and if it is blue,they win $1.The second game has a bag with 10 marbles in it-1 red,4 blue,and 5 green.The player draws one marble from the bag; if it is red,they win $20; if it is blue,they win $5; and if it is green,they win $1.Both games cost $5 to play.Kate decides to play the second game.Kate's expected value of payoff is:

The fee that insurance companies collect in exchange for covering unpredictable costs is called a:

Insurance policies can be bought to cover unexpected costs due to which kind of risk?

Insurance companies:

A mechanism for reallocating risk is:

The interest rate:

People cope with uncertainty about the future:

In general,the amount people pay for insurance is:

The future value of a deposit is: