Question 3 10 pts Let W represents an individual's annual earned income and U(W) = (W/10)0'5 is this individual's von Neumann-Morgenstern utility index (or utility
Question 3 10 pts Let W represents an individual's annual earned income and U(W) = (W/10)0'5 is this individual's von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is [x]. (NOTE: Write your rst answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed. Use a period for the decimal separator and a comma to separate groups of thousands. HINT: See Example 7.2.) 2,580.00
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