Please write your own answer, so many answers copied from the same guy, I would notice! I would tip if you are actually writing your own solution. Leave ur em# ail on paper UncertaintyThe Utility fct is U = W2/3 + 1000Flood occurs with Probabilities=1/20. The Value of house $540,000 if no flood. After aflood, the value is $40,000. Cost of insurance is 20 cents per dollar.a. Calculate EUb. Calculate EVc. Calculate CEd. Calculate RPe. Calculate the variance and standard deviationf. How much insurance should you buy? Assume your are paying premium in all event.g. What is the expected profit of the insurance company?h. Calculate the coefficient of absolute risk aversioni. Calculate the coefficient of relative risk aversion

Answered: D. Cost of insurance is 20 cents per…

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D. Cost of insurance is 20 cents per dollar. and standard deviation ould vou buy? Assume your are paving premium

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please write your own answer, so many answers copied from the same guy, I would notice! I would tip if you are actually writing your own solution. Leave ur em# ail on paper

Uncertainty
The Utility fct is U = W2/3 + 1000
Flood occurs with Probabilities=1/20. The Value of house $540,000 if no flood. After a
flood, the value is $40,000. Cost of insurance is 20 cents per dollar.
a. Calculate EU
b. Calculate EV
c. Calculate CE
d. Calculate RP
e. Calculate the variance and standard deviation
f. How much insurance should you buy? Assume your are paying premium in all event.
g. What is the expected profit of the insurance company?
h. Calculate the coefficient of absolute risk aversion
i. Calculate the coefficient of relative risk aversion

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