Let $P=(0\mathrm{.}7,100,15)$ be a risky prospect. State $2$ could be thought of as the occurrence

of an accident which imposes a financial loss of $15($figures could be thousands of euros$).$ An

insurance company is willing to sell insurance cover against the accident at a premium rate

of pin$(0,1).$ If the utility function of the individual is $v(y)=y^{\frac{1}{2}},$ which is the maximum

premium rate that would be accepted by the decision$-$taker? $($Hint: calculate the premium

rate that makes zero the demand for insurance cover$).$ Which is the amount of insurance

cover contracted by the individual if $p=0\mathrm{.}305?$ Which is the cost of insurance? Does he

contract a complete cover against his potential accident loss? Which would be the premium

rate to contract a complete cover? Why is this is not an option?