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QUESTION 3 [5 Points]: Suppose that Charlene has an income of $110,000 per year and that there is a 1 in 5 [20%]: chance that
QUESTION 3 [5 Points]: Suppose that Charlene has an income of $110,000 per year and that there is a 1 in 5 [20%]: chance that she will get sick in a given year. Let's suppose that the cost of the illness [in terms of lost work time and medical bills} is $30,000 which leaves her with an income of only $30,000 in that particular year. Utility \"Healthy Up: = UH Samoan 533.coo $94,110:] gnome '"mme a] 1What is the actuarially fair premium for Charlene's situation? In] Continue to assume the given information. Suppose that the gure above represents Charlene's utility over various income levels. What is Charlene willing to pay for insurance? c] Continue to assume the given information. We know that Charlene would buy actua rially fair insurance but if the insurance company applied a 20% loading fee would Charlene still purchase the health insu ra l'IL'E
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