Use the following to answer questions:
-(Table: Total Utility of Income After College Expenses) The Smith family will choose to purchase insurance:
A) at any premium.
B) at a premium for which the reduction in risk leaves the expected value of their income after tuition the same.
C) up to but not exceeding the point at which the premium is that of a fair insurance policy.
D) at a premium for which the reduction in risk is that of a fair insurance policy.

Question

Use the following to answer questions: 
-(Table: Total Utility of Income After College Expenses) The Smith family will choose to purchase insurance:
A) at any premium. 
B) at a premium for which the reduction in risk leaves the expected value of their income after tuition the same. 
C) up to but not exceeding the point at which the premium is that of a fair insurance policy. 
D) at a premium for which the reduction in risk is that of a fair insurance policy.

Quizplus · Accepted Answer

The Smith family will choose to purchase insurance at a premium for which the reduction in risk leaves the expected value of their income after tuition the same. This is because they are risk-averse and want to reduce the uncertainty of their income.

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