1. Business
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  3. 1 20 points the following table displays the uncertainties that...

Question: 1 20 points the following table displays the uncertainties that...

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1. (20 points) The following table displays the uncertainties that Mary faces around her monthly income: Probability Income 2.000 5.000 D .2 0.8 (a) (5 points) What is Marys expected income? (b) (5 points) If Marys utility function is U(income) Vincome, what is Marys expected utility of income or expected value of utility of income. Why? every day she is sick? This implies that she will not suffer any income loss if she falls sick. c) (5 points) Draw a graph in which income is on the X axis and Utility is on the Y axis. Is Mary a risk averse person? (d) (5 points) What is the maximum amount that Mary will be willing to pay for a health insurance that pays her for

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