Business, 24.10.2019 00:50 alannalizettep8trnj

Suppose all individuals have a utility function of u = √c, where c is the amount of consumption a person has in any given period. there are two types of people: those at high risk, with a 4% chance of accident, and those at low risk, with a 2% chance of accident. half of individuals are high risk, and half are low risk. the income of all individuals is $40,000 per year, and a catastrophic accident costs $30,000. calculate the actuarially fair full insurance premium for each type of person, assuming the insurance company can identify who is high risk and who is low risk.

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Suppose all individuals have a utility function of u = √c, where c is the amount of consumption a pe...

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