Your Current Disposable Income Is $10,000 $U = \sqrt { I }$

question 27

Multiple Choice

Your current disposable income is $10,000. There is a 10% chance you will get in a serious car accident, incurring damage of $1,900. (There is a 90% chance that nothing will happen.) Your utility function is $U = \sqrt { I }$ , where I is income. What is the most you would be willing to pay for this policy (rather than no insurance) ?

• A) $100
• B) $190
• C) $199
• D) $270

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