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Ben faces a 20% chance of having a fire that will reduce his net worth to $1000, a 25% chance that a fire will reduce
Ben faces a 20% chance of having a fire that will reduce his net worth to $1000, a 25% chance that a fire will reduce it to $4000, and a 55% chance that nothing detrimental will happen, so that his business will retain its worth of $20,000. What is the maximum amount he will pay for insurance if his utility is provided by U(W) = Ln(W) where Ln stands for natural logarithm.
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