(Answered) A family owns a house worth 250000 and believes that the

Economics

A family owns a house worth $250,000 and believes that the probability that a fire will house burn to the ground (complete loss) is 0.1% (or 0.001). Use this information to answer the following questions.

(a) If the family own no other assets than this house, what is the expected value of their asset?

(b) If the family had $25,000 sitting in a FDIC insured savings account, what would the expected value of their assets be?

(c) If this family was offered a homeowner's insurance policy that included coverage for loss due to fire, how much would they be willing to pay to cover their home completely? (Their reservation premium should leave them indifferent between insuring or not.)

View complete question

Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M92047860
Price:- $15

Verified Expert

Priced at $30 Now at $15, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Macroeconomics

Question - a a firm producing two products x and y where x

Question - a. A firm producing two products X and Y where x and y are the quantity of product X and Y produced respectively. If the firm produces on the same isocost and has a fixed cost of $1000. Given the marginal cost ...

Question explain which direction the below referenced

Question: Explain which direction the below referenced supply or demand curve will shift AND comment on the impact of the shift on equilibrium price and quantity. a) John, who is a clothing producer, now has to pay more ...

Question consider the technology represented by y x104

Question: Consider the technology represented by y = (x_1)^0.4 (x_2)^0.6. The marginal products are MP_1 = 0.4/x_1 and MP_2 = 0.6/x_2. We now consider the problem of cost minimization. Write the problem of cost minimizat ...

Question - consumer choice problems duality ii individuals

Question - Consumer choice problems (duality) II Individuals consume three breakfast goods - cereal q1, bacon q2 and eggs q3. Preferences are modelled by an indirect utility function v(p1, p2, p3, y) = y/ Root(p1(p2+p3)) ...

Question assume two countries a and b with sizes of

Question: Assume two countries, A and B, with sizes of domestic markets 300 million and 533 1 3 million units in annual sales, respectively. In this market, firms compete by differentiating their product, while the cost ...

Question 1 otrue or xfalse1 a trade-off is a principle for

Question: 1. O(True) or X(False) 1. A trade-off is a principle for market activities. 2. A manager's salary is the opportunity cost. 3. A trade provides a division of labor. 4. The market failure always results in the ne ...

Question - how does strategic positioning benefit a firm

Question - How does strategic positioning benefit a firm? Discuss the importance of advertising, branding, and the effect of both on the product's demand curve.

Question at the farmers market in irvine california the

Question: At the farmer's market in Irvine, California, the price of avocados is set at $3 each. At that price, 120 avocados are supplied but only 100 are purchased. Represent this on a supply and demand graph and answer ...

Question president trump has put forward a tax plan that

Question: President Trump has put forward a tax plan that would significantly cut personal and corporate income taxes in the U.S. Assume that Congress passes this tax cut plan and President personal Trump signs it into l ...

Question positions on whether the constitution should be

Question: Positions on whether the Constitution should be amended to require a balanced budget reflect opposing views about whether such an amendment would be an appropriate solution to the problem of persistent federal ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Macroeconomics Expert