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(1 point) My current wealth is $1000 and I have exponential utility with a=0.001. There is a 5% chance that my basement will start leaking
(1 point) My current wealth is $1000 and I have exponential utility with a=0.001. There is a 5% chance that my basement will start leaking next week, in which case I will have to spend $450 to fix the problem. I am offered an insurance contract that costs c today, and will pay for any future repairs in the event it does start leaking. (a) What is my utility if I do not purchase the insurance and my roof does not leak? utiles. (b) What is my utility if I do not purchase the insurance and my roof does leak? utiles. (c) What is my utility if I purchase the insurance? utiles. (d) Should I purchase the insurance if c = 42.03? (e) What is the maximum price that I should be willing to pay for the insurance? Please round your answer to the nearest cent. Maximum Price = $ (1 point) My current wealth is $1000 and I have exponential utility with a=0.001. There is a 5% chance that my basement will start leaking next week, in which case I will have to spend $450 to fix the problem. I am offered an insurance contract that costs c today, and will pay for any future repairs in the event it does start leaking. (a) What is my utility if I do not purchase the insurance and my roof does not leak? utiles. (b) What is my utility if I do not purchase the insurance and my roof does leak? utiles. (c) What is my utility if I purchase the insurance? utiles. (d) Should I purchase the insurance if c = 42.03? (e) What is the maximum price that I should be willing to pay for the insurance? Please round your answer to the nearest cent. Maximum Price = $
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