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October 21, 2014

October 21, 2014

Posted by **Susan** on Saturday, December 5, 2009 at 6:40am.

(A) £975.

(B) £199.

(C) £1000.

(D) £900.

(E) £1164.

(Solution is A, 975)

- Economics -
**economyst**, Saturday, December 5, 2009 at 2:37pmWithout insurance, Pete's expected utility is .9*sqrt(2*10000) + .1*sqrt(2*2500) = 134.3502884 utils So, what wealth give him equal amount of utility. Well, work the utility formula backwards. That is (134.3502884^2)/2 = 9025. Take it from here.

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