Suppose you own a luxury flat which is valued at $20mm You figure that the chance of a fire is 0 1 and the damage in case of a fire would be $8 million Assume the utility of wealth of overall homeowners is represented by Vw (a) What is the optimal amount of insurance you would buy (b) What is the ...

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Suppose you own a luxury flat which is valued at $20mm. You figure that the chance...

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Suppose you own a luxury flat which is valued at $20mm. You figure that the chance of a fire is 0.1 and the damage in case of

(a) What is the optimal amount of insurance you would buy? (b) What is the insurance premium per unit of protection to be cha (d) Why do actual insurance policies cost more than the actuarially fair premium?

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Principles of Finance

ISBN: 978-1285429649

6th edition

Authors: Scott Besley, Eugene F. Brigham

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Posted Date: Jan 03, 2021 09:31 PM

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Suppose you own a luxury flat which is valued at $20mm. You figure that the chance...

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