Suppose a Person Has a 1/100 Chance of Being Mugged

question 8

Multiple Choice

Suppose a person has a 1/100 chance of being mugged on the street.His utility function is √(Wealth) .He initially has $1,600 which he carries on him at all times.If he's mugged he loses all of his money.What is the maximum he would be willing to pay to insure his money against mugging?

• A)$40.13
• B)$16
• C)$25.67
• D)$34.84

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Definitions:

National Average

The mean value calculated from data points collected across a nation, often used in reference to economic, educational, or health indicators.

Test Statistic

A calculated value from sample data used to make decisions about hypotheses, typically measuring how far the sample evidence deviates from what is expected under the null hypothesis.

Normal Population

A population where the distribution of data points follows a normal (bell-shaped) distribution, characterized by a specific mean and standard deviation.

Confidence Interval

A range of values, derived from sample data, that are believed to contain the value of an unknown population parameter with a stated level of confidence.