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(10 points) The decision to insure: You have $100,000 in wealth. There is a 10 percent chance someone will steal $25,000. You can buy insurance
(10 points) The decision to insure: You have $100,000 in wealth. There is a 10 percent chance someone will steal $25,000. You can buy insurance for $5,000 that will replace any loss. Use this data to answer the following: a. If all you care about is maximizing your wealth, will you choose to insure? Explain. b. Suppose you care about your expected wealth. Will you choose to insure? Explain. c. Suppose you don't like risk. Will you choose to insure? Explain. d. Explain 3 limitations of using expected return a method for making decisions under uncertainty
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