How much would gail pay for a fair insurance policy

Reference no: EM13245555

Gail has purchased a relatively unknown Stradivarius violin with a value of $2,000,000 which she plans to play every day (and therefore must keep at home). Gail is risk-averse. She is concerned about the potential loss of the violin through fire, theft, or any number of other calamities. She is thus in the market for insurance. The statistical probability of something happening to the Strad is 0.1%.

a. How much would Gail pay for a fair insurance policy?

b. Under what circumstances would Gail be willing to purchase an insurance policy for $3000?

Reference no: EM13245555

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