Business, 19.10.2021 14:00 allycoops666666
Shane just bought a house worth $360,000 in an area that is known for floods. A flood occurs with a 5% chance and if it occurs, his home is reduced in value to $202,500. Shane has utility function given by U(X) = under X. He would be willing to pay a maximum of for flood insurance. The fair insurance premium for flood insurance is___. Shane's risk premium is.
Suppose, instead, that Shane's utility function is given by U(X) = underroot X^2. Then, the maximum he would be willing to pay for flood insurance is.
a. 6205.83
b. 1068.75
c. 1245.75
d. 5245.50
e. 7875
f. 8943.75
g. 18,000
h. 25,100
Answers: 2
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Shane just bought a house worth $360,000 in an area that is known for floods. A flood occurs with a...
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