Question: Joans utility function for her asset position x is given by u(x) = x 1/2 . Currently, Joans assets consist of $10,000 in cash and

Joan’s utility function for her asset position x is given by u(x) = x^1/2. Currently, Joan’s assets consist of $10,000 in cash and a $90,000 home. During a given year, there is a .001 chance that Joan’s home will be destroyed by fire or other causes. How much would Joan be willing to pay for an insurance policy that would replace her home if it were destroyed?

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