Imagine your liquid wealth is $50,000 and you know that one out of every four (i.e., 25%) of your friends traveling to Thailand gets food poisoning. The breakdown of those unlucky 25% is 10% end up in the hospitalwith $1,000 of medical expenses. Out of bad luck,5%not only end up in the hospital with a medical bill, but also miss their returning flight and have to purchase another plane ticket for $1,600. Finally, the remaining 10% do not experience severe food poisoning and need to purchase only $100 worth of medicine. If you are planning to travel to Thailand, how much are you willing to pay for travel insurance?

Assume your risk aversion is γ = 2.