ONLY need help with question h please! Maria's house is worth...
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ONLY need help with question h please!
Maria's house is worth 1 000 000 SEK. Her utility function is given by Umwhere m represents her wealth (the value of the house). The probability of the house burning down is 0,2. A fire would reduce the house value to 300 000 SEK. 0,5 Sure Suppose that Maria can buy insurance that yields K SEK in case the house burns down. The insurance will cost her 0,2K SEK. rw w r AFM-vename, w " wyMAN AV MinA a ".zww,ave, fa "an av, vo UNF5 www A en, "ad'.Kivioa turvaan. w h) Suppose Joseph is in the same situation as Maria, i.e., his house is worth 1 000 000 SEK. His utility function is given by U-m, where m represents her wealth (the value of the house). The probability of the house burning down is 0,2. A fire would reduce the house value to 300 000 SEK. Fires in the houses are independent in the statistical sense. Is it beneficial for Maria and Joseph to establish a mutual insurance company whereby the share losses? Calculate Maria's new expected utility given that they have created a mutual insurance company and discuss the result. 0,5
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