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Maria is a member of an organized crime group and has a current income of $400,000. Because of her dangerous line of work, she knows
Maria is a member of an organized crime group and has a current income of $400,000. Because of her dangerous line of work, she knows that her odds of assassination are 40%, and she is therefore considering taking out a life insurance policy. Suppose an insurance company offers two different levels of coverage. Assume that the policies are actuarially fair and that the insurer knows the probability that Maria is going to die. Complete the following table by determining the benefit each policy would provide in the event of Maria's death. If Maria dies, her husband could go to work and earn 5100,000 a year. Complete the following table by computing the value of the family's income under each of the given policies ( A and B) in both scenarios (she lives or dies), and then determining the expected value of income under each policy. The following graph presents Maria's family's utility as a function of their income. Select the grey points (star symbol) to view the exact values of utility at different levels of income. Given these options, Maria Will choose True or False: Regardless of whether the insurance is actuarially fair, Maria will want to fully insure. True False Maria is a member of an organized crime group and has a current income of $400,000. Because of her dangerous line of work, she knows that her odds of assassination are 40%, and she is therefore considering taking out a life insurance policy. Suppose an insurance company offers two different levels of coverage. Assume that the policies are actuarially fair and that the insurer knows the probability that Maria is going to die. Complete the following table by determining the benefit each policy would provide in the event of Maria's death. If Maria dies, her husband could go to work and earn 5100,000 a year. Complete the following table by computing the value of the family's income under each of the given policies ( A and B) in both scenarios (she lives or dies), and then determining the expected value of income under each policy. The following graph presents Maria's family's utility as a function of their income. Select the grey points (star symbol) to view the exact values of utility at different levels of income. Given these options, Maria Will choose True or False: Regardless of whether the insurance is actuarially fair, Maria will want to fully insure. True False
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