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Jared is considering buying boat insurance. His annual income is ? = 100, and the cost...

Jared is considering buying boat insurance. His annual income is ? = 100, and the cost to replace his boat in the event that he crashes it is ? = 36. Jared’s utility function over his own wealth is ?(?) = √?. Jared’s subjective estimate of the probability that he crashes his boat this year is ? ? = 0.05. What is the maximum amount that Jared would be willing to pay for boat insurance for the year? Assume the insurance company covers the entire cost of replacing the boat. (Hint: consider Jared’s wealth and his expected utility of that wealth in the case with and without insurance, and find the point where he’s indifferent.)

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jeff jeffy answered 2 years ago
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