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What is the individual expected utility

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Reference no: EM132617105

In reference to the previous question: Suppose the individual has a maximum willingness to pay (WTP) for insurance of $2,799.

In this case, what is the individual's risk premium (NOTE: Round your answer to the nearest whole number, with no dollar sign or commas)?

The previous question was: (no answer required):

An individual earns $70,000 annually, and has no insurance. In a given year, there is a 10 percent probability (i.e. 0.1) of an adverse event. If the event occurs, the individual will have expenses (or a loss) of $25,000. The individual derives utility from income according to the following formula:

U = Y(0.4) (i.e. Y raised to the 0.4 power), where Y = income.

What is the individual's expected utility (NOTE: Round your answer to 1 decimal value, e.g. 36.7)?

Reference no: EM132617105

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