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Please highlight all answer and please answer all questions. Make it easy to read the answer. For question A the choices are purchase or not
Please highlight all answer and please answer all questions. Make it easy to read the answer. For question A the choices are purchase or not purchase please choose which one. For question C the choices are purchase or not purchase please choose which one. For question d the choices are expected value or expected utility for the first question in the box. And the next box is risk taker or risk avoider please choose which one. And the next box is low or high please choose which one. And highlight all questions.
Alexander Industries is considering purchasing an insurance policy for its new office building in St. Louis, Missouri. The policy has an annual cost of $10,000. If Alexander Industri doesn't purchase the insurance and minor fire damage occurs, a cost of $100,000 is anticipated; the cost if major or total destruction occurs is $200,000. The costs, including the state-of-nature probabilities, are as follows: Damage None Minor Major Decision Alternative Purchase insurance, d Do not purchase insurance, Probabilities S1 S3 10,000 10,000 100,000 0.03 10,000 200,000 0.96 0.01 (a) Using the expected value approach, what decision do you recommend? The best decision using the Expected Value approach is to purchase (b) What lottery would you use to assess utilities? (Note. Because the data are costs, the best payoff is $0.) Round your answer in one decimal place. insurance, with an expected cost of $ Profit Utility $0 $10,000 $100,000 $200,000 10 (c) Assume that you found the following indifference probabilities for the lottery defined in part (b). What decision would you recommend? Cost Indifference Probability 10,000 0.99 100,000 p-0.50 Select your answer- (d) Do vou favor usina expected value or exDected utilitv for this decision problem? Whv
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