Consider the following utility

timer Asked: Oct 31st, 2015

Question description

Consider the following utility of wealth function: U(W) = 40*W0.5You currently have $8,000. There is an 8% chance that you get sick, in which case you lose half of your wealth ($3,000).A) What is your expected wealth?B) What is your expected utility?C) What is the maximum amount you would be willing to pay for an insurance to avoid such uncertainty? (you can show on a graph for partial credit)

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