Answer Happy

Suppose that you are playing soccer at Philadelphia Soccer League. The number of games in a regular season is 15. Your current salary is $100K per year. According to your contract if you miss 8 games because you get injured you will be paid only $60K. Your probability of staying healthy is 0.60. Let's assume your utility is given in the following table Income Total Utility $0 0 $20K 60 $40K 110 $60K 150 $80K 180 $100K 200 a) Explain what expected utility means (3 points) b) Calculate the expected utility in this question? (7 points) b) If one insurance company offers you full compensation (the company will pay you $40K if you get injured and missed 8 games) and charges you a premium of $20K, would you buy the insurance? To receive full credit you must calculate the expected utility of this offer and explain your answer. (15 points)