Suppose the Ajax Insurance Company Provides Insurance for Skydivers Whose

Multiple Choice

Suppose the Ajax Insurance Company provides insurance for skydivers whose wealth before diving is $400.An accident will leave divers with a wealth of $100.The company divides the divers into two classes: safe (probability of an accident = 0.2) and unsafe (probability of an accident = 0.5) .The utility of wealth for all divers is given by the function: U(w) = w^0.5.The utility of no insurance for the safe diver is:

A) 15.
B) 17.3.
C) 18.
D) 18.3.
E) none of the above.