Consider the setup from Questions 1 and 2. How much profits, in expectation, does the insurance company earn on insuring the individual? a. £5 000 O b. £10000 £20 000 O d. £0

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A: We are going to calculate Certainty equivalent and Expected Value to answer this question.

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Q: Question 1) An expected utility maximiser owns a car worth £60000 and has a bank account with…

A: Note:- “Since you have asked multiple question, we will solve the first question for you. If you…

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A: P1: $50 in the risky asset, $150 in the risk-free asset (Total wealth $200)

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A:

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A: EV = Expected Value  We need to find the Expected values in each scenario to answer this question.

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A: Explanation: The person would be killing to pay the euro of 20000 the reason for the same one is…