Walther owns a home in flood-prone Paradise Basin. If there is no flood the home and land together will be worth $2400. If there is a flood, Walther's home will be destroyed but the land will still be worth $600. There is 1/10 of chance that Walther's house will be destroyed by the flood. Walther can buy flood insurance for $0.2 per dollar of coverage. Let and be the value of respective values of his land in the case of a flood or no flood. Suppose the equation represents the possible values of and that Walther can achieve by buying some amount of insurance. What is the value

$2,554

Explanation:

The computation of value is shown below::-

Assume insurance purchase is N units

= $2,400 - $0.2 per dollar

= $600 - 0.2 M + M

= $600 + 0.8 M

$2,400 - $0.2 M = a - ($600 + 0.8 M) ÷ b

$2,400 - $0.2 M = a - $600 ÷ b - 0.8 ÷ b

now we will equate the situation

-0.2 M = 0.8 M ÷ b

-0.2 = 0.8 ÷ b

b = 4

Now, we will put the value of b to find out the value of a

a - $600 ÷ b = $2,400

a - $600 ÷ 4 = $2,400

a - $150 = $2,400

a = $2,400 + $150

a = $2,550

Now we will find out the a and b by putting the values

= a + b

= $2,550 + 4

= $2,554

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.