Gillian recently purchased a new home which cost her $350,000.She has installed a home security system and has fire exinguishers all over her home. she feels that the precautions she has taken to protect her home may be enough, and she is seriously considering not purchaing home insurance will cost $2,000 and the insurance company estimates that there is a 0.5% chance that the home will be totally destroyed.

(a) Using decision theory, calculate the expected value of her two options: insuring the risk. Which one would you choose using htis method? (retain the risk)

(b) Using the minimax strategy, which alternative would Gillian choose? (insurance)