Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy.  The fire statistics indicate that in a given year the probability of property damage in a fire is as follows: Fire Damage $100,000 $75,000 $50,000 $25,000 $10,000 $0 Probability .006 .002 .004 .003 .005 .980 If Burger Prince was risk neutral, how much would they be willing to pay for fire insurance?   If Burger Prince has the utility values given below, approximately how much would they be willing to pay for fire insurance?

In the Hawaiian Beach Boy surf board vendor scenario, what if the fine was increased to $190 but the probability of a fine decreased to one in 20 days, 5%?  What would be the expected value – Exp(RS) --  of continuing to rent surfboards?  Assume the other numbers stay the same.  He makes $300/day and to rent boards from friends costs him $100 a day.  So, he makes $200 a day.  Write out the expected value formula, plug in the numbers, and show the math.  Hint: the Exp(RS) should be higher than the previously calculated $160.

Exercise 4: Insurance Fiona has von Neumann-Morgenstern utility function u(x) = VT and initial wealth 640, 000. She faces a 25% chance of losing L = 280, 000. 1. Is Fiona risk averse? 2. What is Fiona's utility if no loss occurs, what is her utility if the loss occurs? What is Fiona's expected utility? 3. What is the cost of fair insurance against the possible loss? Suppose Fiona is able to choose insurance with any coverage z E [0, 1] (i.e. 0 0 C(z) = if z = 0 4. Suppose co = 0 and c1 = 70,000. Is insurance at coverage level z > 0 fair insurance? What coverage level z* would Fiona choose? Explain. 5. Suppose co = 100 and c1 = 70,000. Is insurance at coverage level z > 0 fair insurance? What coverage level z** would Fiona choose? Explain. (Note that co = 100 is an "avoidable fixed cost" which is only paid if she chooses strictly positive insurance coverage. However, the "marginal cost" of additional insurance, c1 = 70,000, is the same as in the previous part.) 6. Suppose co = 100 and…

help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working