The utility is U = W /2 - 400S + 70S /2; where W is wealth and S is care taken to avoid accidents. Probability
The utility is U = W /2 - 400S + 70S /2; where W is wealth and S is care taken to avoid accidents. Probability of accident is 0.75 - $1/2 Wealth is $700,000 without accident and $300,000 with accident. a. Calculate S, EU and CE without insurance (5 points). b. Calculate S and EU with full insurance (5 points)
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