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I'm new to using Excel and I really need help solving this problem. If possible, please also explain what Excel functions you used. Thank you!
I'm new to using Excel and I really need help solving this problem. If possible, please also explain what Excel functions you used. Thank you!
H I J K L M B | D E F G 10 11 A risk agent, whose utility is given by U(w) = 5In(w) and initial 12 wealth is $10,000 is faced with a potential loss of $3,500 with a probability 13 of p=0.20. What is the maximum premium they would be willing to pay to 14 protect themselves against this loss? 15 risk appetite Risk averse 16 EV 17 EU 18 U(w-y) = E[U(w)] 19 5In(10,000-y)=B17 20 find y 21 If you are given the opportunity to buy insurance for $450 22 would you take the insurance? WTP 0 intial wealth 10,000 -3,500 y= H I J K L M B | D E F G 10 11 A risk agent, whose utility is given by U(w) = 5In(w) and initial 12 wealth is $10,000 is faced with a potential loss of $3,500 with a probability 13 of p=0.20. What is the maximum premium they would be willing to pay to 14 protect themselves against this loss? 15 risk appetite Risk averse 16 EV 17 EU 18 U(w-y) = E[U(w)] 19 5In(10,000-y)=B17 20 find y 21 If you are given the opportunity to buy insurance for $450 22 would you take the insurance? WTP 0 intial wealth 10,000 -3,500 y=Step by Step Solution
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