Your wealth is comprised of two assets: (1) house & (2) chec…
Your wealth is comprised of two assets: (1) house & (2) checking account. Your house is valued at $120,000. There is a 5% probability that your house burns. If your house burns it is worth $0. The only other asset that you own is a checking account worth $10,000. If you don’t have fire insurance what is the expected loss from a fire?
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