-Van, Whose Utility of Wealth Curve Is Shown in the Above

question 146

Multiple Choice

-Van, whose utility of wealth curve is shown in the above figure, owns a home that is valued at $100,000. There is a 10 percent chance that the house will be destroyed by hurricane. The value of insurance to Van is

• A) $10,000.
• B) $15,000.
• C) $20,000.
• D) $30,000.

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Definitions:

Book Value

The net value of a company's assets expressed on its balance sheet, equal to its total assets minus liabilities, preferred stock, and intangible assets.

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends.

Capital Stock

The original amount the owners paid into the company plus any additional paid-in capital to purchase stock in the company.