Flightguard Insurance provides life insurance for commercial air flights.

  1. Flightguard Insurance provides life insurance for commercial air flights. They offer a (“fair insurance”) bet where you are allowed to trade $23 in the good (“alive”) state where there is no plane crash for $200,000 in the bad (“not alive”) state where there is a crash. Let P be your probability of a bad state on a flight. Calculate the value for P for this bet to be fair insurance.
  2. Given the probability of a bad state on a flight is actually about one in 1.15 million flights, what should the premium be for fair insurance?
  3. Explain why or why not a rational consumer should purchase Flightguard’s insurance policy.
 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"