Question: . Uncertainty The Utility fct is U = W 2 / 3 + 1 0 0 0 Flood occurs with Probabilities = 1 / 2

. Uncertainty The Utility fct is U = W2/3+1000 Flood occurs with Probabilities=1/20. The Value of house $540,000 if no flood. After a flood, the value is $40,000. Cost of insurance is 20 cents per dollar. a. Calculate EU b. Calculate EV c. Calculate CE d. Calculate RP e. Calculate the variance and standard deviation f. How much insurance should you buy? Assume your are paying premium in all event. g. What is the expected profit of the insurance company? h. Calculate the coefficient of absolute risk aversion i. Calculate the coefficient of relative risk aversion

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