What is janes certainty equivalent

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Reference no: EM13862641

Jane obtains utility W^1/2 from wealth W. Jane has $100, but there is a 25% chance she will require surgery which costs $64.

(a) Sketch this utility function, indicating the values of Jane’s wealth if she does and if she does not need surgery.

(b) calculate the expected value of Jane's wealth

(d) what is Jane's certainty equivalent?

(e) an insurance company incurs a cost of $4 per additional contract it sells. Can the company profitably insure Jane? Explain

Reference no: EM13862641

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