15.17. If you remain healthy, you expect to earn an income of $100,000. If, by contrast, you...
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15.17. If you remain healthy, you expect to earn an income of $100,000. If, by contrast, you become disabled, you will only be able to work part time, and your average income will drop to $20,000. Suppose that you believe that there is a 5 percent chance that you could become disabled. Furthermore, your utility function is What is the most that you would be willing to pay for an insurance policy that fully insures you in the event that you are disabled?
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