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Suppose a person chooses to play a gamble that is free to play. In this gamble, they have a 10% chance of $100.00, and a
Suppose a person chooses to play a gamble that is free to play. In this gamble, they have a 10% chance of $100.00, and a 90% chance of nothing. Their utility function is represented in the following equation: U =W 1/2 where W is equal to the amount of "winnings" (or the income). Suppose now Brown Insurance Company offers the person the option of purchasing insurance to insure they will win the $100. What is the minimum amount Brown Insurance would charge you to insure your win? O. 90 O 99 0 1 O 10
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