Question: Suppose Ana's current wealth is $500, and she is debating a trip to Reno. Although she doesn't have a lucky number, her most recent interest

Suppose Ana's current wealth is $500, and she is

Suppose Ana's current wealth is $500, and she is debating a trip to Reno. Although she doesn't have a lucky number, her most recent interest is a new game similar to roulette, in which she places money on odd every time. Suppose that there is a 50% chance that the ball will land on odd and her a wealth will increase to $900, but there is also a 50% chance that the ball will land on even and her wealth will decrease to $100. The following graph shows Ana's utility curve as a function of wealth, U (W). All of the black points (plus symbols) on the graph represent various points along this curve. . Note: Select a point on the graph to see its coordinates. ? 100 U(W) go 80 + 70 60 X UTILS (Utils) * 50 40 + 30 20 10 0 0 100 200 300 400 500 600 700 800 900 1000 WEALTH (Dollars) Because her utility at this level of wealth is her expected If Ana takes the gamble, the expected value of her wealth is s utility from taking the gamble, you know that she must be Suppose that Ana is forced to either make the gamble or pay an insurance premium (P) to avoid the gamble and retain a wealth level of $500 - P. Given Ana's risk preferences, the maximum premium that she would be willing to pay must equate the utility levels from these two scenarios, as seen in the following equation. Complete the equation with the appropriate selections. Expected Utility from Gamble = Utility with Premium 0 (500 - P) U (500 P). According to the graph of U (W) already given, the maximum premium that Ana is willing to pay is

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