Midterm Exam #1 information | Business Risk Management | Le Tour ...

The first midterm exam in Finance 4335 consists of 3 problems that are worth 32 points each; you get 4 points for ?successfully? writing your name on the cover of the exam booklet .? Be sure to show your work as well as provide a complete answer for each problem; i.e., in addition to producing numerical results, also explain your results in plain English.

All three problems involve applications of expected utility.? A particularly important?concept on this exam involves knowing how to calculate risk premiums.? On the formula sheet that I just posted for the midterm exam, I list two ways to do this:

1) the ?exact? method involves calculating E(U(W)), setting U(W_CE) = E(U(W)) and solving for W_CE, and then calculating the risk premium by subtracting W_CE from E(W).

2) the ?approximate? method involves calculating the expected value (E(W)) and variance of wealth and the Arrow-Pratt absolute risk aversion coefficient.? Once you have these data, then you can calculate the risk premium by multiplying 1/2 times the variance times the Arrow-Pratt absolute risk aversion coefficient evaluated at E(W).

Other important concepts to think about include the following:

1. A utility function is risk averse/risk neutral/risk loving if marginal utility decreases/stays constant/increases as wealth increases; therefore, utility functions such as U(W) = ln W and?U(W) = W^.5?are risk averse?because of diminishing marginal utility.??To see this,?note?that marginal utility in both cases is positive (which implies ?greed?); for U(W) = ln W, marginal utility is U?(W) = 1/W?> 0 and for U(W) = W^.5, marginal utility is U?(W) = .5W^-.5?> 0.? Furthermore, the rate of change in marginal utility in both cases is negative (which implies ?fear?); for U?(W) = 1/W,?U?(W) =?-1/W² < 0, and for U?(W) = .5W^-.5, U?(W) = -.25W^-1.5?< 0.
2. The Arrow-Pratt absolute risk aversion coefficients for U(W) = ln W and?U(W) = W^.5 are 1/W and .5/W respectively.? Therefore, a person with utility U(W) = W^.5 is less risk averse than a person with utility U(W) = ln W.? Furthermore, both utility functions imply decreasing absolute risk aversion (DARA), which means that as wealth increases, risk aversion associated with a specific gamble declines.? This?is a particularly important insight,?as it?helps to?explain?a lot of familiar ?real world??behavior; e.g., why?firms go public (recall the ?Risk Analysis Class Problem?, which?illustrates how?an entrepreneur as well as her investors are all better off in an expected utility sense?from going public).? Finally,?DARA implies constant absolute risk aversion (CRRA).

In the meantime, if you have any other questions or concerns related to either the exam or Finance 4335 more generally, feel free to call me at 254-307-1317.

Source: http://risk.garven.com/2012/02/15/midterm-exam-1-information/

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NASA scales back Mars exploration, Marvin the Martian thinks it's just lovely

NASA recently showed flashes of its old bravado by announcing plans for a lunar waypoint near the far side of the moon. Cold, hard reality brought the agency back to Earth this week, however, as it just announced a scaling back of its Mars exploration program. Thanks to funding cuts, NASA is scuttling its "ambitious" (i.e. expensive) flagship missions to the Red Planet for the near term. That means withdrawing from the ExoMars missions led by Europe and putting on hold plans to collect samples -- though the Mars Science Laboratory is still a go. NASA is slated to receive $1.2 billion for its planetary science program, down 20 percent from what it gets now, with more cuts likely on the way. In the meantime, the agency is still hopeful about sending humans -- or perhaps a wascally wabbit -- to Mars by the 2030s.

NASA scales back Mars exploration, Marvin the Martian thinks it's just lovely originally appeared on Engadget on Wed, 15 Feb 2012 13:32:00 EDT. Please see our terms for use of feeds.

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Source: http://feeds.engadget.com/~r/weblogsinc/engadget/~3/1h1_9nCjaIs/

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Virtual reality supports planning by architects

ScienceDaily (Feb. 15, 2012) ? Even the most exact construction plan lacks many details and design options. The building owner needs imagination to obtain an idea of the constructed building. Now, the 3D video glasses made by the KIT spin-off "inreal Technologies" provide a true representation in virtual reality. With the help of integrated high-resolution motion sensors, the virtual environment adapts to the natural movement of the head in real time. At the CeBIT, the young entrepreneurs will present their new product at the stand of their partner, Carl Zeiss AG.

The inreal terminal is an innovation for use in architecture. Users can "access" their future home prior to construction. The key component of the terminal is a head-mounted display, 3D video glasses with integrated high-resolution motion sensors. They measure the position and movement of the head and, thus, allow for an adaptation of virtual environment in real time. Via tablet control, design wishes, such as changes of the wall color, floor cover, or room layout, can be made immediately. The terminal is advantageous for the client and reduces the architect's working time during the planning phase.

The terminal, consisting of the 3D video glasses, controller, 3D display, and tablet, may not only be used by architects, but also for other purposes. Any environment can be "modeled" on the computer and "accessed" via the terminal. "The terminal gives the users an authentic feeling of space due to intuitive navigation," explains Moritz Luck, one of the founders of the spin-off. In the future, the technology shall be developed further for home users.

inreal Technologies was established in 2010 by the KIT students Thomas Schander, Michael Beyhs, and Moritz Luck. In cooperation with the Institute for Information Management in Engineering (IMI), the young entrepreneurs developed their ideas to maturity. For their innovative approach, they were granted a spin-off stipend under the EXIST program by the Federal Ministry of Economics and Technology.

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The State of Business Ethics in America: Good news and bad news

by Michael Josephson on February 13, 2012

According to The 2011 National Business Ethics Survey? ?by the Ethics Resource Center released in January 2012, there is both good and bad news about the ethical landscape in American business organizations.

The good news: ?misconduct has reached an historic low and observers of wrongdoing are more willing to report than ever.?

The bad news: ??ethics cultures are eroding and employees? perceptions of their leaders? ethics are slipping. Additionally, pressure from employers to compromise standards is at an all-time high and retaliation has reached an alarming rate?

Perception and Reporting of Misconduct ? 45% of employees said they witnessed misconduct at work (compared to 49% in 2009 and the record high of 55% in 2007) and 65% said they reported the misconduct they saw (compared to 63% 2009 and the record low of 53% in 2005).

Retaliation against whistleblowers - 22% of those who said they reported misconduct claim they experi?enced some form of retaliation in return (compared to 15% in 2009 and 12% in 2007.

Pressure to Compromise Ethics ? 13% said they felt pressured to compromise standards in order to do their jobs (compared to 14% in 2000)

Weakening Ethical Culture ? 42% described the ethical culture of their company as weak (compared to 35% in 2009)

Greater oversight on ethical issues ? 42% reported that their company has increased efforts to raise awareness about ethics and 34% said management now watches them more closely.

??

Tagged as: Business Ethics, Ethical Culture, Ethics Resource Center Survey, reporting misconduct

Source: http://josephsoninstitute.org/business/blog/2012/02/the-state-of-business-ethics-in-america-good-news-and-bad-news/

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Obama's budget offers short-term help for economy

President Obama will send Congress a budget that provides short-term help to a struggling economy while offering a long-term plan to deal with soaring deficits. Republicans say it's more of the same failed solutions.

The president will send Congress a budget that will provide short-term help to a struggling economy while offering a long-term plan to deal with soaring deficits, the White House said Sunday. Republicans attacked the spending blueprint as offering more of the same failed solutions for the economy.

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The 2013 budget being released Monday will propose public works spending while seeking tax increases on the wealthy and corporations to claim progress on the federal deficit in his upcoming budget. The spending plan projects a deficit for this year of $1.3 trillion, the fourth straight year of $1 trillion-plus deficits, and $901 billion next year.

Jacob Lew, the president's chief of staff, said the new budget would put the country on track to achieve $4 trillion in deficit reductions over the next 10 years, achieved by raising taxes on the wealthy and trimming government spending. Lew said the president's budget would cut spending by $2.50 for every $1 it raises in new taxes.

"In the long run, we need to get the deficit under control in a way that builds the economy," Lew said during appearances on the Sunday talk shows. "We do it in a way that's consistent with American values so that everyone pays a fair share."

The release of Obama's spending plan for the budget year that begins Oct. 1 marks the official start to an election-year budget battle over taxes and spending as the nation's debt tops $15 trillion.

The Monitor's Weekly News Quiz, Feb. 3-10, 2012

Republicans on Sunday criticized the document for its proposals to increase spending in such areas as infrastructure and for its tax increases.

House Republicans will put forward a sharp alternative to Obama's plan that will provide deficit reduction through an overhaul of Medicare and other programs and without tax increases.

"We're taking responsibility for the drivers of our debt," said the chairman of the House Budget Committee, Rep. Paul Ryan, R-Wis. "So when the dust settles and people see actually what we're doing, how we're promoting bipartisan solutions."

The president's plan is laden with stimulus-style initiatives, like sharp increases for highway construction, school modernization, and a new tax credit for businesses that add jobs. But it avoids sacrifice, with only minimal curbs on the unsustainable growth of Medicare even as it slaps a 10-year, $61 billion "financial crisis responsibility fee" on big banks to recoup the 2008 Wall Street bailout.

The budget, administration officials say, borrows heavily from Obama's September submission to a congressional deficit "supercommittee" assigned to come up with at least $1.2 trillion in deficit savings as part of last summer's budget-and-debt pact that avoided a first-ever U.S. default on its obligations. The panel deadlocked and left Washington to grapple with bruising across-the-board spending cuts that kick in next January.

Obama's plan predicts deficit savings of more than $4 trillion over a decade, mixing $1 trillion already banked through last summer's clampdown on agency operating budgets with $1.5 trillion in higher tax revenues reaped from an overhaul of the tax code. It also claims savings from reduced war costs and takes

just a nip at federal health care programs even as it promises $476 billion for road and other surface transportation programs over six years, a significant increase.

It's already received a chilly reception from Republicans who say Obama isn't doing enough to tame the deficit or curb the rapid growth of benefit programs like Medicare.

The budget will also call for a "Buffett Rule" named after billionaire Warren Buffett that would guarantee that households making more than $1 million a year pay at least 30 percent of their income in taxes.

Lew appeared on ABC's 'This Week," CNN's "State of the Union," ''Fox News Sunday," NBC's "Meet the Press" and CBS' "Face the Nation." Ryan was on ABC.

The Monitor's Weekly News Quiz, Feb. 3-10, 2012

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/sJKicl3B5Qo/Obama-s-budget-offers-short-term-help-for-economy

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Remarkable Information To obtain Fit | New Health and Fitness

New Health And Fitness.Org - Health Information You Can Use

Whether you are just starting out having a physical fitness regimen or you tend to be an experienced sportsman, you can always reap the benefits of upping your understanding of health and fitness. Knowing how your body works and how to best improve your level of fitness can make a world of difference. You?ll see better results if you follow the advice in this article.

Make sure that you buy shoes that fit you. You need to shop for workout shoes late in the day, because that is when your feet are the largest. Make sure you possess the majority a good inch on the top of the footwear understanding that the actual shoe will be wider compared to your foot.

If you want to increase your foot speed, then try this. Very first, stand with your toes a part about hip-width. Have your hands down at your sides. Raise your left ft. out there, and also touch the actual feet together with your right hand. Put that foot down, and then repeat this with the opposite foot and hand. Do this as fast you can for around twenty seconds each time. Do around three to five sets.

Marathons used to be for serious runners only, but now they have become a popular goal for casual runners as well. Many people nowadays come to a point in their lives where they feel they want the challenge of finishing a marathon. Luckily there are many good training programs now, to help casual runners prepare for more the 26.2 mile trek.

Be sure that you are getting enough protein in your diet. Protein is crucial to the development of your body and the growth of your cells. It is the energy source that keeps you going throughout the day. Health proteins are available coming from equally canine and seed sources, so it will be easy to incorporate adequate necessary protein inside your dishes.

Reach your fitness goals by planning backwards. Pick when you intend to full the goals after which perform back after that by listing what short-term goals you want to accomplish on the way. This method of thinking causes you to want to achieve those short-term goals because you are no longer viewing them as goals, but as deadlines.

Horseback riding visualize your legs extending all the way through the stirrups to the ground. This technique will give you a better seat and allow you stay in the saddle even in the roughest terrain. Combine this visualization with a deep seat where you position yourself far back in the saddle and your confidence level will shine.

While working out, always decrease the weight by approximately ten percent, when you adjust your grip. For example, if you just finished a set of bench presses doing 200 pounds with a medium grip, you should drop to 180 pounds when switching to a narrow or wide grip. When you switch grips, you are stressing the joints in a different way than you have become accustomed to, which can cause you to get injured. Inversion table can also be a good fitness equipment to alleviate back pains. This can help you make your work outs a bit easier and safer.

Regardless of what you are, you?ll before long view an obvious variation should you increase your exercise routine with the tips you?ve got only figured out. Teaching yourself with regards to appropriate conditioning can certainly help you get the most from the exercises. Remember what you?ve learned from this article, and soon you?ll be in great shape!

Source: http://newhealthandfitness.org/2012/02/11/remarkable-information-to-obtain-fit/

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