A student is considering whether to buy a theft insurance for his newly purchased laptop. Assume the following conditions: Price of insurance: $20 for a year Probability of being stolen in a year: 0.5% Computer worth: $2,000 Net wealth of the student including the computer: $6,000

Also assume the following formulas and parameters: Expected Utility Function Value Function Weighting Function

Determine your choice of buying or not buying the insurance Assuming expected utility theory Assuming prospect theory