Assignment from nickkynickky10 probability questions. most of them are already shown with correct answer. Your task is to give the explanations behind the correctness of these answers and answer correctly the remaining questions.
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Question 1: It would be a bad decision to pay $200 for a certificate enabling the owner to
call the flip of a tack, and if correct, win a gold coin (as in the demonstration from class) if
the bidder believed the probability of calling the tack correctly is 0.5.
Answer: false – CORRECT
Question 2: According to the Five Rules minimizing the chance of losing money is the
appropriate decision criterion.
Answer 2: false – CORRECT
Q3: One reason we can take the e-value of monetary prospects for most of our professional
practice is that the range of prospects we are examining is small when compared to the
company’s total assets. That is, we are using only a small range of their u-curve.
Answer 3: True – CORRECT
Q4. Eric does not follow the delta property. He has just paid $215 for a certificate that
allows him to call the flip of an “unfair” coin. If he calls it correctly he will win $500. If he
calls it incorrectly he will win $0.00. His PISP for the certificate is $315. The offers to tell
Eric the outcome of the impending coin toss. What is Eric’s PIBP for the clairvoyant’s
information?
a) $185,
b) Need Eric’s u-cover to determine his PISP for the information,
c) $285, or
d) Need Eric’s u-curve probability he assigns to the “unfair” coin landing Heads (or Tails)
to determine his PIBP for the information.
Answer (d) is not the correct answer. Correct answer is either a,b or c.
5. Ryan does not follow the delta property. He has just paid $150 for a certificate that
allows him to flip a “fair” ({H|&}=0.5) coin. If the coin lands heads he will win $500. If it
lands tails he will win $100. His PISP for the certificate is $225. The clairvoyant offers to
tell him the outcome of the impending coin toss. What is Ryan’s PIBP for the clairvoyant’s
information?
a) $150,
b) $0.00,
c)$75, or
d) Need Ryan’s u-curve to determine his PIBP information.
Answer
$150 is not the correct answer.
6. Which of the following criteria must an information gathering test meet in order to be
value adding?
I. The test results must be observable,
II. Relevant to the distinction of interest,
III. Material to the decision you face,
IV. Economic, meaning it must cost less than its value.
Which of the four are true?
Answer
7. Evel’s micromort value is $30. He has been offered $10,000 to attempt a stunt where he
will jump the Grand Canyon with a rocket-propelled motorcycle. Evel believes he will
either complete the stunt successfully or be killed. Because of his great skill (and possible
delusion), he believes there is only 100 chances out of a million that he will be killed. Should
he attempt the stunt?
Answer:
Yes – CORRECT
Q8: Thomas has 3 coins in his pocket. One coin is “2-Headed”, while the other coins each
have one “head” and one “tail”. He takes one coin from his pocket and without looking at
it lays it on the table. He then looks at it and sees that “Heads” is showing. What is the
probability that this is the “2-Headed” coin?
Answer 8:
2 − Head Coin P(2 − Head Coin Head )
P
=
Head
P(Head )
1
2 1
3
=
= =
1 1 1 1 1
4 2
+ + 1
3 2 3 2 3
9. According to the Five Rules minimizing the change of losing money is the appropriate
decision criterion
Answer
… false – CORRECT
10. Hannah satisfies the delta property for all prospects valued in dollars. Which of the
following statements must be true?
a) Hannah is risk-neutral,
b) Hannah’s PIBP for clairvoyance is equal to the difference between the value of a deal with
free clairvoyance and the value of the same deal without clairvoyance,
c) Adding the delta to each of the prospects of a deal Hannah faces will decrease her certain
equivalent by the delta.
d) Hannah’s risk odds for a deal where she could win or lose $10,000 must be greater than 1.
Answer ( c )is not the correct answer.
…
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