If a risk-averse individual owns a home worth $100,000, and that individual is willing to pay $1,000 for an annual fire insurance policy that covers the entire loss in the event of a fire, then we know that: A. There is a one percent chance that the home will be destroyed by fire in the next year B. There is a greater than a one percent chance that the home will be destroyed by fire in the next year C. There is less than a one percent chance that the home will be destroyed by fire in the next year D. None of the above is correct
If a risk-averse individual owns a home worth $100,000, and that individual is willing to pay $1,000 for an annual fire insurance policy that covers the entire loss in the event of a fire, then we know that: A. There is a one percent chance that the home will be destroyed by fire in the next year B. There is a greater than a one percent chance that the home will be destroyed by fire in the next year C. There is less than a one percent chance that the home will be destroyed by fire in the next year D. None of the above is correct
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section19.2: Managing Risk
Problem 2QQ
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If a risk-averse individual owns a home worth $100,000, and that individual is willing to pay $1,000 for an annual fire insurance policy that covers the entire loss in the event of a fire, then we know that:
A. |
There is a one percent chance that the home will be destroyed by fire in the next year
|
|
B. |
There is a greater than a one percent chance that the home will be destroyed by fire in the next year
|
|
C. |
There is less than a one percent chance that the home will be destroyed by fire in the next year
|
|
D. |
None of the above is correct
|
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