Multiple Choice
Bikul has just started a great job and plans to buy a fancy car worth $100,000.Bikul is risk-averse in money matters,but he likes to drive fast,so the probability that he wrecks 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 offers Bikul a fair insurance policy,the premium will be:
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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