What is the least you would be willing to accept to sell you

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Suppose you own a house in Mobile, AL. Your house is currently worth $200,000. Suppose there is a 5% chance that a flood destroys your house, in which case it will be worth $0. You have $50,000 in your bank account. a. What is the expected value of your house? b. You have a utility function over wealth (w) given by U(w) = square root of w. What is the least you would be willing to accept to sell your house? c. Why are the answers to the above two questions different?

Reference no: EM13149832

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