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Damage in the event of a flood

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Your utility function is U(m) = ln(m), where m is income. You are considering buying flood insurance. You have income, m, of $50,000. A flood would cost you $30,000. The probability of a flood is 1%. What is the maximum amount you would be willing to pay for an insurance policy that will pay you for 75% of your damage in the event of a flood?

Reference no: EM131055002

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