Greg is a thrifty fellow and his savings are $90,000. Using his savings

money, he got a luxury sports car at $50,000. The probability that his car

will be stolen (and never recovered) within the next year is 0.2. His utility

function isu(w) = value).w, wherewis wealth (which may also include car's

a)Find the expected value, CE and P of buying the car as a gamble.

b)Suppose Greg can purchase a car insurance policy offering full coverage of the car in the case of fire and costing $10,000 for one year. Would he purchase it? Calculate the cost of car insurance at which the decision will change.