Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate
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- Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate that in a given year the probability of property damage in a fire is as follows:
Fire Damage | $100,00 0 | $75,000 | $50,000 | $25,000 | $10,000 | $0 |
Probability | .006 | .002 | .004 | .003 | .005 | .980 |
If Burger Prince was risk neutral, how much would they be willing to pay for fire insurance?
If Burger Prince has the utility values given below, approximately how much would they be willing to pay for fire insurance?
Amount of Loss | $100,0 00 | $75,00 0 | $50,00 0 | $25,00 0 | $10,00 0 | $5,000 | $0 |
Utility | 0 | 30 | 60 | 85 | 95 | 99 | 100 |
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
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