Question: Question 4 (3 points) Mike has a utility function expressed by U(W)= W0.5, where W stands for wealth (assuming wealth is positive, i.e. W>0), and

Question 4 (3 points) Mike has a utility function expressed by U(W)= W0.5, where W stands for wealth (assuming wealth is positive, i.e. W>0), and U(W) is the utility given a certain level o W. Mike has initial wealth of $10,000. Mike feels that he faces the following probability distributions of losses with respect to his wealth: Loss Amount ($) Probability $0 70% $1,000 20% $8,000 10% What is the maximum insurance premium Mike is willing to pay (closest to)? $1.000 $ 1.267 $1.359 $1.584

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