# Economics Of Risk and Uncertainty Applied Problems

Week 1 - Assignment                Economics of Accident and Uncertainty Activated Problems Please complete the afterward two activated problems. Show all your calculations and explain your results.   Problem 1: A acceptable university benefactor has agreed to accord a ample bulk of money for apprentice scholarships. The money can be provided in one agglomeration sum of \$12 actor in Year 0 (the accepted year), or in parts, in which \$7 actor can be provided at the end of Year 1, and addition \$7 actor can be provided at the end of Year 2. Describe your acknowledgment for anniversary account beneath in complete sentences, whenever it is necessary. Show all of your calculations and processes for the afterward points: Assuming the befalling absorption amount is 8%, what is the present amount of the additional addition mentioned above? Which of the two alternatives should be called and why? How would your accommodation change if the befalling absorption amount is 12%? Provide a description of a book area this affectionate of accommodation amid two types of acquittal streams applies in the “real-world” business setting. Problem 2:   The San Diego LLC is because a three-year project, Activity A, involving an antecedent advance of \$80 actor and the afterward banknote inflows and probabilities:     Year 0 Year 1 Year 2 Year 3    Probability Cash Flow (\$ mil.) Probability Cash Flow (\$mil.) Probability Cash Flow (\$ mil.)    0.2 50 0.1 60 0.3 70    0.3 40 0.2 50 0.4 60    0.4 30 0.3 40 0.1 50    0.1 20 0.4 30 0.2 40   Initial Investment \$80 mil.   Discount Rate 8% Describe your acknowledgment for anniversary catechism in complete sentences, whenever it is necessary. Show all of your calculations and processes for the afterward points: Describe and account Activity A’s accepted net present amount (ENPV) and accepted aberration (SD), bold the abatement amount (or certain absorption rate) to be 8%. What is the accommodation aphorism in agreement of ENPV? What will be San Diego LLC’s accommodation apropos this project? Describe your answer. The aggregation is additionally because addition three-year project, Activity B, which has an ENPV of \$32 actor and accepted aberration of \$10.5 million. Activity A and B are mutually exclusive. Which of the two projects would you adopt if you do not accede the accident factor? Explain. Describe the accessory of aberration (CV) and the accepted aberration (SD) in affiliation with accident attitudes and accommodation making. If you now additionally accede your risk-aversion attitude, as the CEO of the San Diego LLC will you accomplish a altered accommodation amid Activity A and Activity B? Why or why not?

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