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Question 4. Consider a strictly risk-averse decision maker who has an initial wealth of u; but who runs a risk of a loss of D

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Question 4. Consider a strictly risk-averse decision maker who has an initial wealth of u; but who runs a risk of a loss of D dollars. The probability of the loss is 6. It is possible? however, for the decision maker to buy some insurance. One unit of insurance costs q dollars and pays 1 dollar if the loss occurs. What is the optimal level of insurance when q = 6

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