Q2: Flood insurance Suppose you have just purchased a house worth $200,000 in a region of Florida in which the probability of the house's destruction by flooding is about 1 in 100 (that is, the property may be expected to be destroyed by floods about once every one hundred years). 1. How much would you be prepared to pay for a flood insurance policy against the value of your home? 2. Suppose the insurance company is offering an alternative form of insurance policy, in which the dollar premium is reduced, but the insurance only applies to certain days of the week. How much would you pay for a flood insurance policy that will pay out only if the flood hits on a Monday, Wednesday, or Friday? 3. Discuss the potential behavioral bias in your decision making