Insurance demand. Alex has riskless assets of $10,000 in their bank account and owns a car worth $ 25,000 . Alex is risk - averse with the following utility function of final wealth : Their car is subject to the following loss distribution :

Loss Prob.

25,000 0.01

10,000 0.04

1,000 0.05

0 0.90

A) Find the expected loss, the expected value of the car and Alex's expected utility without insurance. Also find Alex's certainty equivalent for the car and their risk premium. What is Alex's maximum premium for full insurance coverage?

B) Would Alex buy full insurance on their car if the premium was $800? Explain.