Utility of no insurance for the safe diver

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Suppose the Ajax Insurance Company provides insurance for skydivers whose wealth before diving is $400. An accident will leave divers with a wealth of $100. The company divides the divers into two classes: safe (probability of an accident = 0.2) and unsafe (probability of an accident = 0.5). The utility of wealth for all divers is given by the function: U(w) = w0.5. The utility of no insurance for the safe diver is:

  • 15.
  • 17.3.
  • 18.
  • 18.3.
  • none of the above.

Reference no: EM131405509

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