Question: Jon has a utility function expressed by U(W) =W=Where W is Jon's wealth. Currently, Jon has W = $120. He faces potential loss L =

Jon has a utility function expressed by U(W) =W=Where W is Jon's wealth. Currently, Jon has W = $120. He faces potential loss L = $100 with probability p = 0.25. Pure Premium Charged to Jon is equivalent to an expected loss of $25 and the expected Utility is 9.7

1. If Jon purchases insurance for the pure premium, what is his utility? Jon now pays $25 and the insurance firm will indemnify him for $100 if he experiences the loss.

His utility is?

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