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Suppose Ilhan's utility function is U+0.5*Y^1/2, Ilhan's income is $125,000 when healthy but only $60,000 when ill. Ilhan perceives probability of becoming ill is equal to 0.30. What is the actuarially fair premium (AFP) and risk premium (RP) Ilhan would be willing to pay?

Suppose Ilhan's utility function is U+0.5*Y^1/2, Ilhan's income is $125,000 when healthy but only $60,000 when ill. Ilhan perceives probability of becoming ill is equal to 0.30. What is the actuarially fair premium (AFP) and risk premium (RP) Ilhan would be willing to pay?

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
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Suppose Ilhan's utility function is U+0.5*Y^1/2, Ilhan's income is $125,000 when healthy but only $60,000 when ill. Ilhan perceives probability of becoming ill is equal to 0.30. What is the actuarially fair premium (AFP) and risk premium (RP) Ilhan would be willing to pay?
Transcribed Image Text:Suppose Ilhan's utility function is U+0.5*Y^1/2, Ilhan's income is $125,000 when healthy but only $60,000 when ill. Ilhan perceives probability of becoming ill is equal to 0.30. What is the actuarially fair premium (AFP) and risk premium (RP) Ilhan would be willing to pay?
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