Exercise 5: Insurance Consider two individuals, Dave and Eva. Both Dave and Eva have initial wealth 810; 000 and face a 40% chance of losing L = 450; 000. Dave has von Neumann-Morgenstern utility function uD(x) = x and Eva has von Neumann-Morgenstern utility function uE(x) = p x. 1. What do you know about Dave's and Eva's risk preferences? 2. What is the most Dave would be willing to pay for complete insurance against the loss? 3. What is the most Eva would be willing to pay for complete insurance against the loss? Suppose they are each able to choose insurance with any coverage level z 2 [0; 1] (i. e. 0 z 1). If an individual buys insurance coverage at level z, they will get reimbursed 450; 000z if the loss occurs. Insurance coverage at level z costs c(z) = z 200; 000. 4. What coverage level zD would Dave choose? Explain. 5. Based on your previous results, try to explain that Eva chooses a strictly positive coverage zE > 0. 6. Is Eva's optimal choice full insurance, i. e. zE = 1? ECON

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The following accounts appeared in recent financial statements of delta air lines. identify each account as either a balance sheet account or an income statement account. for each balance sheet account, identify it as an asset, a liability, or stockholders' equity. for each income statement account, identify it as a revenue or an expense. item financial statement type of account accounts payable balance sheet advanced payments for equipment balance sheet air traffic liability balance sheet aircraft fuel (expense) income statement aircraft maintenance (expense) income statement aircraft rent (expense) income statement cargo revenue income statement cash balance sheet contract carrier arrangements (expense) income statement flight equipment balance sheet frequent flyer (obligations) balance sheet fuel inventory balance sheet landing fees (expense) income statement parts and supplies inventories balance sheet passenger commissions (expense) income statement passenger revenue income statement prepaid expenses income statement taxes payable balance sheet

You cannot make copies of media, even as a personal backup, without violating copyright. true