What is your expected income and risk premium

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Your disposable income is $100,000 a year. You face a 50/50 chance of losing $10,000 from an illness requiring surgery and value your income to the utility function U=income^0.6. What is your expected income, what is your certainty equivalent, what is your risk premium, & how much would you pay for full insurance?

Reference no: EM13739939

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