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An individual earns $70,000 annually, and has no insurance.In a given year, there is a 10 percent probability (i.e. 0.1) of an adverse event.If the
An individual earns $70,000 annually, and has no insurance.In a given year, there is a 10 percent probability (i.e. 0.1) of an adverse event.If the event occurs, the individual will have expenses (or a loss) of $25,000.The individual derives utility from income according to the following formula:
U = Y(0.4) (i.e. Y raised to the 0.4 power), where Y = income.
What is the individual's expected utility (NOTE:Round your answer to 1 decimal value, e.g. 36.7)?
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