(Answered) If a person with utility from income is u y06 where y is

Management Studies

If a person with utility from income is U = Y^0.6 (where Y is income) and an initial income of $40,000 faces the risk of losing all of her income with a likelihood of three percent, what is the most you could charge such a person for full insurance against this risk? And what would actuarially fair insurance cost her? Show work.

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