1. Miranda uses a credit card to make routine purchases. In the past, she could pay her total credit card bill every month. However, recently she’s been spending a lot more on clothes and eating out, so she’s started carrying a balance on her card. What type of expense is Miranda dealing with?
How did you arrive at this answer?

2. Mateo owns a clothing store. It’s getting close to the holiday season, and he’s hired a few temporary workers to cover the longer hours. Mateo needs to budget his money to pay these additional wages.
What type of expense is Mateo dealing with?
How did you arrive at this answer?

3. Thomas is excited about the new truck he purchased. Now, he needs to add the monthly truck payment to his budget as a new expense.
What type of expense is Thomas dealing with?
How did you arrive at this answer?

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?