Life insurance pays your heirs when you croak, and pays nothing otherwise. Let's suppose Northwest Mutual...

Life insurance pays your heirs when you croak, and pays nothing otherwise. Let's suppose Northwest Mutual offers me a $100,000 life insurance policy. Now suppose I have a utility function over what I leave to my family, LaTeX: U=W^{0.75} U = W 0.75 , where W is the resources available to my family next year. Assuming that, if alive, I'm worth $100,000 to my family (in wages, child care, cooking, and fun), what is the maximum price I'd be willing to pay for this life insurance policy for one year?

Expert Solution

ekkarill92 answered 2 years ago

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