Question:
An individual owns a mobile phone, currently valued at Rs. 40,000. The current wealth of the individual is Rs. 2,00,000 (including the value of the mobile phone). According to reports, there is a 20 percent chance of mobile phone theft and an actuarially fair insurance policy is available to insure the loss of the mobile phone against a theft. The individualโs von-Neumann-Morgenstern utility of wealth function is given by $๐(๐) = \sqrt{๐}$, where ๐ is the wealth. Then, the maximum willingness to pay for such an actuarially fair insurance policy is Rs. _____ (rounded off to nearest integer).
An individual owns a mobile phone, currently valued at Rs. 40,000. The current wealth of the individual is Rs. 2,00,000 (including the value of the mobile phone). According to reports, there is a 20 percent chance of mobile phone theft and an actuarially fair insurance policy is available to insure the loss of the mobile phone against a theft. The individualโs von-Neumann-Morgenstern utility of wealth function is given by $๐(๐) = \sqrt{๐}$, where ๐ is the wealth. Then, the maximum willingness to pay for such an actuarially fair insurance policy is Rs. _____ (rounded off to nearest integer).
Updated On: Oct 1, 2024
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Correct Answer: 8355
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The correct answer is :8355
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