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Enter a formula to calculate john expected utility

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John has the following utility function: U = 2Y(0.25) (i.e. 2 x Y raised to the 0.25 power), where Y is the amount of John's income in any given period. John's income is $92,000 per year, and during that time, there is a 3% probability that he will have a serious medical event that would cost him $35,000 in medical expenses.

1. Enter a formula to calculate John's expected utility

2. Enter a formula to calculate an optimal, actuarially fair insurance premium.

3. Enter a formula to calculate John's utility if he purchased this optimal insurance policy

4. Given his utility function and risk of loss, what is the maximum John would be willing to pay for insurance?

5. What is John's risk premium?

Reference no: EM132479758

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