Consider the following statements when answering this question;
I. Without fire insurance, the expected value of home ownership for a risk averse homeowner is $W. Insurance companies are willing to sell this homeowner a policy that guarantees the homeowner a wealth of $W.
II. In a neighborhood where the price of houses are identical, the probability of a fire is identical, and the value of damage done by fires is identical, the risk premium for an insurance policy that repays all the cost of the fire damage does not vary across homeowners.
A) I and I are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) I and II are false.

Question

Quizplus · Accepted Answer

The Answer of Consider the following statements when answering this question;
I. Without fire insurance, the expected value of home ownership for a risk averse homeowner is $W. Insurance companies are willing to sell this homeowner a policy that guarantees the homeowner a wealth of $W.
II. In a neighborhood where the price of houses are identical, the probability of a fire is identical, and the value of damage done by fires is identical, the risk premium for an insurance policy that repays all the cost of the fire damage does not vary across homeowners.
A) I and I are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) I and II are false.

Consider the Following Statements When Answering This Question;