Now assume that Akira decides to buy a theft insurance for his motorcycle. He finds a policy

Question:

Now assume that Akira decides to buy a theft insurance for his motorcycle. He finds a policy at ¥0.72 million a year, which promises to provide him with a replacement motorcycle worth ¥1.8 million if his motorcycle is stolen.

Is Akira willing to buy this insurance? If not, would he be willing to pay ¥0.36 million a year for such insurance?

Akira lives in a neighborhood in Japan in which 25 percent of the vehicles are stolen every year. He recently purchased the latest model of his favorite motorcycle, which cost him ¥1.8 million. (This is Akira’s only wealth.)
The table shows Akira’s utility of wealth schedule. image text in transcribed