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Alex plays football for a local club in Kumasi. If he does not suffer any injury by the end of the season, he will get a professional contract with Kotoko which is wealth S10,000.00. If he is injured though he will get a contract as the fitness coach wealth $100.00. The probability of injury is 1 0%. 3. i. Describe the lottery i. What is the expected utility of the lottery if U(x)-vx ii What is the expected value of the lottery iv. Assume he could buy insurance at price P that would pay $9,900.00 in the case IV of the injury, what is the highest value of P that makes it wealth while for Alex to purchase the insurance v. Using the Bernolli utility function Ux) V, calculate the probability premium for the gamble G16, 4, /2:/2
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