An insurance company is risk neutral and a potential customer has a constant coefficient of risk aversion
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Question:
An insurance company is risk neutral and a potential customer has a constant coefficient of risk aversion equal to 0.1.
Given that there is a .01 chance that the customer's $10,000 car will be destroyed by an accident in the coming year, how much should the customer be willing to pay for insurance? What would be the insurance company’s minimum selling price? Would they be able to agree on a deal?
Related Book For
Statistics for Management and Economics Abbreviated
ISBN: 978-1285869643
10th Edition
Authors: Gerald Keller
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