Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate that in a given year the probability of property damage in a fire is as follows: Fire Damage $100,000 $75,000 $50,000 $25,000 $10,000 $0 Probability .006 .002 .004 .003 .005 .980 If Burger Prince was risk neutral, how much would they be willing to pay for fire insurance? If Burger Prince has the utility values given below, approximately how much would they be willing to pay for fire insurance? Amount of loss $100,000 $75,000 $50,000 $25,000 $10,000 $5.000 $0 Utility 0 30 60 85 95 99 100
Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate that in a given year the probability of property damage in a fire is as follows: Fire Damage $100,000 $75,000 $50,000 $25,000 $10,000 $0 Probability .006 .002 .004 .003 .005 .980 If Burger Prince was risk neutral, how much would they be willing to pay for fire insurance? If Burger Prince has the utility values given below, approximately how much would they be willing to pay for fire insurance? Amount of loss $100,000 $75,000 $50,000 $25,000 $10,000 $5.000 $0 Utility 0 30 60 85 95 99 100
Chapter8: Sequences, Series,and Probability
Section8.7: Probability
Problem 4ECP: Show that the probability of drawing a club at random from a standard deck of 52 playing cards is...
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9) Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy.
The fire statistics indicate that in a given year the probability of property damage in a fire
is as follows:
|
Fire Damage |
$100,000 |
$75,000 |
$50,000 |
$25,000 |
$10,000 |
$0 |
|
Probability |
.006 |
.002 |
.004 |
.003 |
.005 |
.980 |
If Burger Prince was risk neutral, how much would they be willing to pay for fire
insurance?
If Burger Prince has the utility values given below, approximately how much would
they be willing to pay for fire insurance?
|
Amount of loss |
$100,000 |
$75,000 |
$50,000 |
$25,000 |
$10,000 |
$5.000 |
$0 |
|
Utility |
0 |
30 |
60 |
85 |
95 |
99 |
100 |
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