Multiple Choice
Bikul has just started a great job and plans to buy a fancy car worth $100,000.Bikul is risk-averse, but he likes to drive fast, so the probability that he wrecks and totals the car (a total loss of $100,000) is 0.10.The probability that he has no accidents is 0.90.If an insurance company were to offer Bikul a fair insurance policy, the premium would be equal to:
A) $10,000.
B) $90,000.
C) $80,000.
D) It is impossible to calculate a premium unless we know Bikul's utility function.
Correct Answer:
Verified
Correct Answer:
Verified
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