Question
This is a question for my Economics of Sports Final: Suppose an individual is risk averse and he buys a new car that is worth
This is a question for my Economics of Sports Final:
Suppose an individual is risk averse and he buys a new car that is worth $40,000 if there is no crash and $10,000 if there is a crash. If the probability of not having a crash is .8 then what is the actuarially fair amount of insurance. How much will this individual pay for the insurance. Identify the risk premium using a graph of his cardinal utility function.
Can you also explain what the actuarially fair amount of insurance is?
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Financial Accounting A Critical Approach
Authors: John Friedlan
4th edition
978-1259066528
