Your house is worth $200,000. Your risk of a catastrophic flood is 0.5%. Such a flood would destroy your house and would not be covered by home owner's insurance. You grumble, but buy flood coverage for $1,200. Are you risk averse or risk seeking?

Select one:

a.

You are risk seeking, because your expected loss is larger than the premium.

b.

You are risk seeking, because your expected loss is smaller than the premium.

c.

You are risk averse, because your expected loss is larger than the premium.

d.

You are risk averse, because your expected loss is smaller than the premium.