Question: 1. 3.5 Using information in the Application Flight Insur ance, show how to calculate the price of fair insur ance if the probability of being

1. 3.5 Using information in the Application “Flight Insur ance,” show how to calculate the price of fair insur ance if the probability of being in a crash were as high as the frequency in 2001, 0.00000077? Use a graph to illustrate why a risk-averse person might buy unfair insurance. Show on the graph the risk premium that the person would be willing to pay.

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