03. [20 pts) You own a house worth at 1 million dollars, and the house is vulnerable to natural hazard next year. Suppose you estimate with probability 0.997 the house will still be worth 1 million (nothing happens), with probability 0.002 the house will be worth 0.5 million (earthquake, flood); and with probability 0.001 the house will be worth nothing (fire). An insurance policy is available to protect your loss at a premium of $3000. Suppose that your utility function of wealth wis Vw. a. (10 pts) Calculate the expected utility if you don't buy this insurance policy. b. (10 pts) Calculate the expected utility if you buy this insurance policy. If you are an expected-utility maximizer, do you want to buy this insurance policy? 03. [20 pts) You own a house worth at 1 million dollars, and the house is vulnerable to natural hazard next year. Suppose you estimate with probability 0.997 the house will still be worth 1 million (nothing happens), with probability 0.002 the house will be worth 0.5 million (earthquake, flood); and with probability 0.001 the house will be worth nothing (fire). An insurance policy is available to protect your loss at a premium of $3000. Suppose that your utility function of wealth wis Vw. a. (10 pts) Calculate the expected utility if you don't buy this insurance policy. b. (10 pts) Calculate the expected utility if you buy this insurance policy. If you are an expected-utility maximizer, do you want to buy this insurance policy