-Steve Owns a Motorcycle Valued at $5,000, and That Is

question 41

Multiple Choice

-Steve owns a motorcycle valued at $5,000, and that is his only asset. There is a 5 percent chance that Steve will have an accident within a year. If he does have an accident, his motorcycle is worthless. Steve's utility of wealth curve is shown in the figure above. An insurance company agrees to pay Steve the full value of his motorcycle in case of an accident if he buys the company's insurance policy. The company's operating expenses are $500 per policy. With no insurance, Steve's expected wealth is

• A) $4,000.
• B) $4,500.
• C) $3,500.
• D) $5,000.

---

Definitions:

Documentation

The process of systematically recording, retaining, and managing information or data for various purposes such as legal, historical, or educational.

Speech Recognition

Technology that can recognize spoken words, converting them into text or executing commands.

Virtual Private Network

A technology that creates a safe, encrypted connection over a less secure network, such as the internet, to provide privacy and data security.

Access Codes

Passwords or numerical codes used to gain entry into secured systems or locations.