Author Question: Ashwini is thinking of buying travel insurance (which pays her if she needs to cancel her trip) for ... (Read 60 times)

magmichele12 · **on:** Jun 29, 2018

Ashwini is thinking of buying travel insurance (which pays her if she needs to cancel her trip) for her trip to Cancun over spring break. There is a 5 percent chance that she will need to cancel her trip.

Without insurance she would lose the full 2,000 price of the trip; with insurance she would get a full refund of 2,000. The premium for this insurance is 105. Which of the following is CORRECT? I. The expected value of Ashwini's loss is 100. II. If Ashwini is risk averse she is willing to buy the insurance only if its price is less than 100. A) I only
B) II only
C) I and II
D) neither I nor II

Question 2

In the above table, the total fixed cost is

A) 0.
B) 20.
C) 30.
D) 50.