If a patient has a probability of being sick of 0.1 and a probability of being...
If a patient has a probability of being sick of 0.1 and a probability of being healthy of 0.9. If the person has a good health her wealth will be $100, if she has bad health her wealth will be $64. Suppose that the utility of wealth come from the following utility function: U(W)=W^0.5.
The fair premium if she is full insured is?
Homework Answers
Fair premium is the expected cost which an insurance company has to pay them
in case of good health company need not pay anything
whereas in case of bad health company pays $36.
Thus expected premium=0.9(0)+0.1(36)=3.6
Fair premium=3.6
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If a patient has a probability of being sick of 0.1 and a
probability of being...
If a patient has a probability of being sick of 0.1 and a probability of being...
If a patient has a probability of being sick of 0.1 and a probability of being healthy of 0.9. If the person has a good health her wealth will be $100, if she has bad health her wealth will be $64. Suppose that the utility of wealth come from the following utility function: U(W)=W^0.5. The reduction in wealth if the patient has bad health is
If a patient has a probability of being sick of 0.1 and a probability of being...
If a patient has a probability of being sick of 0.1 and a probability of being healthy of 0.9. If the person has a good health her wealth will be $100, if she has bad health her wealth will be $64. Suppose that the utility of wealth come from the following utility function: U(W)=W^0.5. The expected utility of the patient if she has no insurance is
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