Refer to the Data Provided in Table 17 -Refer to Table 17

question 28

Multiple Choice

Refer to the data provided in Table 17.3 below to answer the following question(s) . The table shows the relationship between income and utility for Terri.
Table 17.3
$$\begin{array} { | r | c | } \hline \text { Income } & \text { Total Utility } \\\hline \$ 0 & 0 \\\hline \$ 20,000 & 10 \\\hline \$ 40,000 & 25 \\\hline \$ 60,000 & 45 \\\hline \$ 80,000 & 75 \\\hline\end{array}$$
-Refer to Table 17.3. Suppose Terri has a 25% chance of becoming disabled in any given year. If she does become disabled, she will earn $0. If Terri does not become disabled, she will earn her usual salary of $80,000. Terri has the opportunity to purchase disability insurance for $20,000 which will pay her her full salary in the event she becomes disabled. Terri's utility with the policy is ________ and her expected utility without the policy is ________.

• A) 56.25; 45
• B) 45; 56.25
• C) 45; 18.75
• D) 18.75; 37.5

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Definitions:

Shareholder Value

The financial worth that a company delivers to its shareholders, often measured by stock price appreciation and dividend payouts.

Firms Fail

The situation where businesses are unable to continue operations due to financial problems, market competition, or poor management.

Due Diligence

The comprehensive appraisal of a business or individual prior to signing a contract, or an act with a certain standard of care.

Culture Management

The practice of developing and nurturing a specific set of behaviors, values, and practices within an organization.