Question: 3.Assumptions: * Initial Wealth = W1,000 Risk Premium = 30% of Pure Premium U(W) = LOG(W) Probability distribution of Loss Probability Loss 0 0.1

3.Assumptions: * Initial Wealth = W1,000 Risk Premium = 30% of Pure Premium *U(W) = LOG(W) * Probability distribution of Loss Probability Loss 0 0.1 80 0.5 0.2 160 400 0.1 0.1 800 Will a risk averse person prefer (1) no insurance, (2) full insurance, (3) insurance with a W60 deductible, (4) partial insurance with a 25%participation clause (20) hint): Wealth i = Initial Wealth - Gross Premium - Li + Insurance Payment

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Question: 3.Assumptions: * Initial Wealth = W1,000 Risk Premium = 30% of Pure Premium *U(W) = LOG(W) * Probability distribution of Loss Probability Loss 0 0.1

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Question: 3.Assumptions: * Initial Wealth = W1,000 Risk Premium = 30% of Pure Premium U(W) = LOG(W) Probability distribution of Loss Probability Loss 0 0.1