Bikul Has Just Started a Great Job and Plans to Buy

question 66

Multiple Choice

Bikul has just started a great job and plans to buy a fancy car worth $100,000.Bikul is risk-averse in money matters,but he likes to drive fast,so the probability that he wrecks the car (a total loss of $100,000) is 0.10.The probability that he has no accidents is 0.90.If an insurance company offers Bikul a fair insurance policy,the premium will be:

• A)$10,000.
• B)$90,000.
• C)$80,000.
• D)It is impossible to calculate a premium unless we know Bikul's utility function.

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Definitions:

Regular Rate

The standard rate of pay for an employee's normal working hours, not including overtime or bonuses.

Warranty Expense

Costs associated with the obligation of a company to repair, replace, or compensate for defective goods sold to customers.

Warranty Liability

Warranty liability is an obligation that a company assumes when it promises to repair or replace defective products during a specified period, representing a potential future expense.

Federal Unemployment Tax

A payroll tax paid by employers based on the wages paid to employees, used to fund state workforce agencies.