Question:
An individual faces an uncertain prospect, where wealth could be Rs. 10 Lakh with probability 0.75 and Rs. 7 Lakh with probability 0.25.
Let the utility function be U(w) = w3. Then the individual will buy full insurance by paying a premium of Rs. _____ Lakh (round off to 2 decimal places).
An individual faces an uncertain prospect, where wealth could be Rs. 10 Lakh with probability 0.75 and Rs. 7 Lakh with probability 0.25.
Let the utility function be U(w) = w3. Then the individual will buy full insurance by paying a premium of Rs. _____ Lakh (round off to 2 decimal places).
Let the utility function be U(w) = w3. Then the individual will buy full insurance by paying a premium of Rs. _____ Lakh (round off to 2 decimal places).
Updated On: Oct 1, 2024
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Correct Answer: 0.56
Solution and Explanation
The correct answer is: 0.56 or 0.60 (approx.)
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