圖書名稱:Calculation of Various Metrics of Wealth Management
Let’s say you have a total wealth (W) of $100,000, which includes a car worth $20,000. The probability of losing your car (over one year) is 25%. Your utility function is U(W) = ln(W). (a) What is your expected wealth for the next year? (b) What is your expected utility for the next year? (c) What is the actuarially fair premium (AFP)? (d) What is your expected utility if you pay the AFP for full coverage (b = $20,000)? (e) What is the maximum premium you are willing to pay? (f) What is the amount of the difference between the maximum premium and AFP, and what is this called?