Suppose Bob has income of $50,000. There is a 10% chance that Bob will get sick ...

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Suppose Bob has income of $50,000. There is a 10% chance that Bob will get sick ...

suppose Bob has income of $50,000. There is a 10% chance that Bob will get sick and lose half of his income. Suppose Bob’s income-utility relationship is given by the following equation, where I is Bob’s income.

U(I) = Square root 21

Use the facts above to calculate the following:

The premium and payout for a full and fair insurance contract.
The max premium (i.e. the most Bob would ever be willing to pay for insurance)

business economics

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Answer 1

Answer #1

Arve Robs income St/c00 a) alculate phemiuo lo0 (60 下。 lo0 amんact

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Suppose Bob has income of $50,000. There is a 10% chance that Bob will get sick ...

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