Question: * Initial welath = 1,000 * Premium loading = 20% of pure premium * U(W) = ln(W) *Probability distribution of Loss Probability Loss 0.5 0

* Initial welath = 1,000 * Premium loading = 20% of pure premium * U(W) = ln(W) *Probability distribution of Loss

Probability	Loss
0.5	0
0.1	80
0.2	160
0.1	400
0.1	800

Will a risk averse person prefer (1) no insurance, (2) full insurance, (3) insurance with a 80 deductible, (4) partial insurance with a 25% participation clause, (5) partial insurance with a coverage limit equal to 200?

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