Question: = Assume that Jungho's initial wealth is W100.000. The probability of loss distribution is given below and his utility function is U(W) = 10 +

= Assume that Jungho's initial wealth is W100.000. The probability of

= Assume that Jungho's initial wealth is W100.000. The probability of loss distribution is given below and his utility function is U(W) = 10 + VW loss amount probability 0 .80 20,000 .10 60,000 .05 90,000 .05 1) Find the pure premium and expected wealth. (4) 2) Find the expected utility without insurance. (3) 3) Assuming that Jungyae is under same situation and Jungyae's utility function of wealth is U(W) = 2 + 3 In W Jungho and Jungyae have been offered full insurance at a cost of # 16,000. Using risk premium explain why they accept the insurance or not. (12) 4) Assuming that premium loading is 20% of pure premium, Jungho has been offered partial insurance with W2,000 deductible. Using expected utility, explain why Jungho accept the insurance or not. (8)

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