An individual faces an uncertain prospect, where wealth could be 10 lakh probability 0.75 and Rs. 7 Lakh with probability 0.25. Let the utility function be U(w)= w³. Then the Individual will buy full insurance by paying a premium of Rs _______Lakh
A risk premium is an amount of money that an individual or organization demands in exchange for accepting the risk of a potential loss. In the context of insurance, the risk premium is the amount of money that an insurance company charges for providing insurance coverage to an individual or organization. This premium is based on the perceived risk of loss, and is used to cover the costs of providing insurance, including the cost of claims paid out to policyholders. The risk premium is typically higher for policies that cover higher-risk events or activities, and lower for policies that cover lower-risk events or activities.
Hilal Ahmad Dar
RISK PREMIUM AND INSURANCE choice under uncertainty
In the context of insurance, risk premium is the amount of money that an insurance company charges for providing insurance coverage to an individual or organization. The risk premium is based on the perceived risk of loss, and is used to cover the costs of providing insurance, including the cost of claims paid out to policyholders.
Choice under uncertainty refers to the process of making decisions when the outcomes of those decisions are uncertain. In the context of insurance, individuals and organizations face uncertainty about the likelihood of experiencing a loss and the potential cost of that loss. Insurance can help to reduce this uncertainty by providing financial protection against losses. When choosing an insurance policy, individuals and organizations must consider the risk premium charged by the insurance company, as well as other factors such as the coverage provided and the terms and conditions of the policy
Негізгі бет risk premium and insurance. Choice under uncertainty IIT JAM economics 2022 Q 51
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