Burger Prince Restaurant is considering the purchase of a $100,000 fire insurance policy. The fire statistics indicate that in a given year the probability of property damage in a fire is as follows:
a. If Burger Prince was risk neutral, how much would it be willing to pay for fire insurance?
b. If Burger Prince has the utility values given below, approximately how much would it be willing to pay for fire insurance?
a. $1,075
b. $5,000
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