-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. What is Jennifer's expected wealth?
A) $15,000
B) $12,000
C) $13,500
D) $9,000

Question

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. What is Jennifer's expected wealth?
A) $15,000 
B) $12,000 
C) $13,500 
D) $9,000

Quizplus · Accepted Answer

Jennifer's expected wealth is calculated by considering the probability of each outcome: 90% chance of keeping the car ($15,000) and 10% chance of losing it ($0). Expected wealth = 0.9 * $15,000 + 0.1 * $0 = $13,500.

-Jennifer Has the Utility of Wealth Curve Shown in the Figure