Calculate an actuarially fair insurance premium

Assignment Help Public Economics

Reference no: EM13162609

Question. Your utility function is U = ln(2C) where C is the amount of consumption you have in any given period. Your income is $40,000 per year and there is a 2% chance that you will be involved in a catastrophic accident that will cost you $30,000 next year.

a. What is your expected utility?

b. Calculate an actuarially fair insurance premium. What would your expected utility be were you to purchase the actuarially fair insurance premium?

c. What is the most that you would be willing to pay for insurance, given your utility function?

Reference no: EM13162609

Questions Cloud

Explain global ph change incurred after injection of the hcl : what is the global pH change incurred after injection of the HCl? What would the pH change be if this same amount of 1.000 M HCl were put into a gallon of pure water?

Calculate the mass percentage of nitrogen in the sample : If 28.0 mL of .150 M HCL is needed to neutralize all the NH3 from a 2.25-g sample of organic material, calculate the mass percentage of nitrogen in the sample.

What is the most likely reason osha requires : What is the most likely reason OSHA requires ammonium nitrate to be segregated for sulfur or finely divided metals? Explain your answer.

Explain a voltaic cell utilizes the reaction : A voltaic cell utilizes the following reaction: 2Fe3+ + H2 --> 2Fe2+ + 2H+ what is the emf of this cell under standard conditions? what is the emf for this cell

Calculate an actuarially fair insurance premium : Calculate an actuarially fair insurance premium. What would your expected utility be were you to purchase the actuarially fair insurance premium?

State what is the global ph change incurred after injection : what is the global pH change incurred after injection of the HCl? What would the pH change be if the same amount of 1.000 M HCl were put into a gallon of pure water?

Write a formula equation for the reaction : Assume that liquid water forms item 5. Write a formula equation for the reaction that shows the physical states of all compounds?

How many moles of no are formed : If the reaction 4NH3 + 5O2 yeilds 4NO + 6H2O uses 824 g NH3 and excess oxygen, how many moles of NO are formed?

Calculate the theoretical yield : Calculate the theoretical yield of when 114 g of C2H6 reacts with 206g of Cl2 , assuming that and react only to form and .

User Account

All Pages