Sophie is trying to decide whether or not to take out a standard home and contents...
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Sophie is trying to decide whether or not to take out a standard home and contents insurance policy from Homie (a private insurance company). Sophie is risk averse and there is a 20% likelihood that she will require $9000 payout within the next year as her neighbourhood is very prone to theft The current annual fee is $1600 for standard cover and would cover the $9000 payout Answer the following questions: a Will Sophie take out the insurance policy with Homie? Type Y for Yes or N for No. b. Homie offers their "platinum cover" for $3000 annually, which covers extra items such as shoes and handbags. Martha is risk neutral. There must be at least % chance of requiring $22.000 in replacement costs (including these extra items') within the next year, for Martha's decision to purchase the "platinum cover to be efficient. Answer as a percentage to two decimal places. c. If the chance of Martha requiring $22,000 in damages is 24%, will she take out the platinum cover? Type Y for Yes or N for No. Sophie is trying to decide whether or not to take out a standard home and contents insurance policy from Homie (a private insurance company). Sophie is risk averse and there is a 20% likelihood that she will require $9000 payout within the next year as her neighbourhood is very prone to theft The current annual fee is $1600 for standard cover and would cover the $9000 payout Answer the following questions: a Will Sophie take out the insurance policy with Homie? Type Y for Yes or N for No. b. Homie offers their "platinum cover" for $3000 annually, which covers extra items such as shoes and handbags. Martha is risk neutral. There must be at least % chance of requiring $22.000 in replacement costs (including these extra items') within the next year, for Martha's decision to purchase the "platinum cover to be efficient. Answer as a percentage to two decimal places. c. If the chance of Martha requiring $22,000 in damages is 24%, will she take out the platinum cover? Type Y for Yes or N for No.
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a Since Sophie is risk averse and the likelihood of requiring a 9000 payout is 20 it is li... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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