A. Suppose your current disposable income is 10,000$. There is a 10% chance you will get in a serious car accident, incurring damage of 1,900$ which would reduce your disposable income 8,100. There is a 90% chance that nothing will happen.

Your utility function is U= root of F where F is income.

What is the expected utility?

B. Suppose you can get an insurance policy that fully covers you in the event of the car accident. What is the most you would be willing to pay for this policy rather than no insurance?