Answered step by step
Verified Expert Solution
Question
1 Approved Answer
6. (15 points) Alliance insurance company sells travel insurance to cover unforeseen adverse events for travelers. Their typical plan covers the following: o Cancellation: 100%
6. (15 points) Alliance insurance company sells travel insurance to cover unforeseen adverse events for travelers. Their typical plan covers the following: o Cancellation: 100% of trip costs a Trip delay: $500 - Baggage delay: $100 a Medical Expense Benets: $15,000 You are planning a celebratory trip to Las Vegas, leaving late on October 30, 2021, and coming back on November 01, 2021. The cost of the ticket is $432, and you are considering Whether to buy the Alliance travel plan before you leave. You assess the probabilities of events covered by the policy as follows: a Cancellation: 0.001 a Trip delay: 0.005 - Baggage delay: 0.2 a Medical Expense Benets: 0.0001 Given this information, you should denitely buy Alliance's travel coverage for this trip A. if you are risk averse and the price of the policy is less than $26. B. if you are risk neutral and the price of the policy is $26. C. if you are risk neutral and the price of the policy is greater than $25. D. if you are risk neutral and the price of the policy is less than $22.90. E. only if the expected value of the trip to you is greater than $455
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started