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

question 97

Multiple Choice

Refer to the data provided in Table 17.6 below to answer the following question(s) . The table shows the relationship between income and utility for Isabel.
Table 17.6
$$\begin{array} { | c | c | } \hline \text { Income } & \text { Total Utility } \\\hline \$ 0 & 0 \\\hline \$ 40,000 & 20 \\\hline \$ 80,000 & 50 \\\hline \$ 120,000 & 90 \\\hline \$ 160,000 & 150 \\\hline\end{array}$$
-Refer to Table 17.6. Suppose Isabel has a 25% chance of becoming disabled in any given year. If she does become disabled, she will earn $0. If Isabel does not become disabled, she will earn her usual salary of $160,000. Isabel has the opportunity to purchase disability insurance which will pay her her full salary in the event she becomes disabled. Such an insurance policy be worth ________ to Isabel.

• A) $0
• B) less than $40,000 but more than $0
• C) $40,000 or more
• D) indeterminate from the given information

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Definitions:

Binomial Random Variable

A type of random variable that results from a binomial experiment, defined by a fixed number of trials, two possible outcomes per trial, constant probability of success, and independence between trials.

Random Sample

A sample that ensures each member of the population has an equal chance of being included.

Probability

A quantification of the probability that a specific event happens, denoted by a value ranging from 0 to 1.

Alumni

Graduates or former students, especially of a particular educational institution.