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Christina owns a condo in South Padre Island. She is considering buying flood insurance for her condo since her home owners' policy does not cover flood damage. There is a 20% chance that a hurricane will hit the island, causing $100,000 of damage to her condo. Because she is risk averse, she would pay up to $1,000 more than her expected losses for flood insurance. What would be the maximum price she would pay for coverage? 20,000 22,000 21,500 O 21,000

Christina owns a condo in South Padre Island. She is considering buying flood insurance for her condo since her home owners' policy does not cover flood damage. There is a 20% chance that a hurricane will hit the island, causing $100,000 of damage to her condo. Because she is risk averse, she would pay up to $1,000 more than her expected losses for flood insurance. What would be the maximum price she would pay for coverage? 20,000 22,000 21,500 O 21,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Christina owns a condo in South Padre Island. She is considering buying flood insurance for her condo since her home owners' policy does not cover flood damage. There is a 20% chance that a hurricane will hit the island, causing $100,000 of damage to her condo. Because she is risk averse, she would pay up to $1,000 more than her expected losses for flood insurance. What would be the maximum price she would pay for coverage? 20,000 22,000 21,500 O 21,000
Transcribed Image Text:Christina owns a condo in South Padre Island. She is considering buying flood insurance for her condo since her home owners' policy does not cover flood damage. There is a 20% chance that a hurricane will hit the island, causing $100,000 of damage to her condo. Because she is risk averse, she would pay up to $1,000 more than her expected losses for flood insurance. What would be the maximum price she would pay for coverage? 20,000 22,000 21,500 O 21,000
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