Fatma's car is worth 100. The probability that her car will be stolen is 0.5. Fatma...

 

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Fatma's car is worth 100. The probability that her car will be stolen is 0.5. Fatma has 250 in other wealth and her von Neumann-Morgenstern utility function is u(c) = ln(c). Suppose that Fatma can purchase K units of insurance at a price of 0.5K (that is, unit price of insurance is 0.5). In this case, Fatma will purchase units of insurance. Fatma's car is worth 100. The probability that her car will be stolen is 0.5. Fatma has 250 in other wealth and her von Neumann-Morgenstern utility function is u(c) = ln(c). Suppose that Fatma can purchase K units of insurance at a price of 0.5K (that is, unit price of insurance is 0.5). In this case, Fatma will purchase units of insurance.

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