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Mr. Bean's utility function for his asset position xis UXX.Currently he has an annual income...

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Mr. Bean's utility function for his asset position xis UXX.Currently he has an annual income of $82000. He considers buying accident insurance for his car. The probability of accident during the year is 0.1, in which case the damage to the car will be $10300 (assume that at most one accident will occur). He wants to determine the insurance premium he is willing to pay. Let p-Insurance premium. Then he must choose between the following lotteries. 0.10 82000 - 10300 82000 P 0.90 82000 a) What is his expected utility for lottery 1 (L.)? Ans (write your answer with at least two decimal places) b) What is the certainty equivalent for lottery 17 Ans (write your answer with at least two decimal places) c) What is the maximum amount he would be willing to pay for insurance? Ans = (write your answer with at least two decimal places)

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