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Ashley has the utility function U = Vx, where x is wealth. She currently owns assets worth $6,400. There is a 10% chance that she
Ashley has the utility function U = Vx, where x is wealth. She currently owns assets worth $6,400. There is a 10% chance that she will get in a car accident, in which case the value of her assets will decrease to $3,600. Otherwise, they will maintain their value. Use this information to answer questions #1 and #2. 90/, no acid 1. What is the fair insurance premium to fully insure against losses due to an accident? a. $78 6, 400 x 10%= 640 b. $280 3600* 10%= 360 C. $316 . d. $360 280 e. $624 2. What is the most that Ashley is willing to pay for car insurance that will fully insure any loss? a. $624 -b. $316 c. $280 d. $78 e. $36
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