Roulan Has Wealth of $40,000 as Long as His Business

question 50

Multiple Choice

Roulan has wealth of $40,000 as long as his business does not burn down. However, there is a 50% probability that his business will burn down, causing a loss of $30,000 and leaving him with $10,000 of wealth. Roulan's utility function is given by U = W^0.5, where W is wealth. Suppose Roulan purchases insurance to cover the potential $30,000 loss. If the insurance premium is actuarially fair, Roulan's utility with insurance is:

• A) 100.40.
• B) 145.23.
• C) 158.11.
• D) 161.51.

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Definitions:

Normal Personality

A concept referring to patterns of thoughts, feelings, and behaviors that are considered typical or average within a population.

Antisocial Personality Disorder

A mental health condition characterized by a long-term pattern of disregarding or violating the rights of others, lack of empathy, and often criminal behavior.

Clinical Psychologist

A professional specializing in diagnosing and treating mental health disorders through psychological techniques and therapies.