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Consider a risk-averse agent, who has an initial wealth Wo. However, the agent runs a risk of a loss of D dollars. The chance of
Consider a risk-averse agent, who has an initial wealth Wo. However, the agent runs a risk of a loss of D dollars. The chance of the loss is T. Luckily, the agent could buy insurance. The price per unit of insurance is p and each unit of insurance would pay 1 dollar if the loss occurs. a given that =p, solve for the optimal units of insurance that the agent would buy. b suppose i
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