-Ashton Has the Utility of Wealth Curve Shown in the Above

question 123

Multiple Choice

-Ashton has the utility of wealth curve shown in the above figure. He owns a sports car worth $30,000, and that is his only wealth. Ashton is a careless driver and there is a 30 percent chance that he will have an accident within a year. If he does have an accident, his car is worthless. The maximum amount that Ashton is willing to pay for auto insurance is

• A) $6,000 per year.
• B) $3,000 per year.
• C) $9,000 per year.
• D) $10,000 per year.

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Definitions:

Liquidity of Receivables

The ease with which accounts receivable can be converted into cash, reflecting the company's efficiency in managing credit sales.

Accounts Receivable

Financial obligations that clients have towards a company for goods or services delivered but still awaiting payment.

Bank Reconciliation

The process of comparing and adjusting an entity’s accounting records with the bank statements to ensure accuracy and consistency.

Monthly Basis

A regular interval or frequency of events or assessments occurring once every month.