Solve clearly

Suppose that Mallory has $10,000 in wealth. While she is a reasonably healthy college student, she still is susceptible to contracting mononucleosis. In fact, Mallory faces a 25% chance of catching the disease this year. If so, she would have to pay $7,500 in medical expenses. Mallory's utility function over wealth is:

U = 100W^0.5 where W is her wealth

expected income = $8,125

expected utility = 8,750 units

Would Mallory buy a full indemnity insurance policy if the premium is $3,400? Why or why not?

Answer rating: 100% (QA)

To determine whether Mallory should buy a full indemnity insurance policy with a premium of 3400 we ... View the full answer