Setup from Question 1) An expected utility maximiser owns a car worth £60000 and has a bank account with £20000. The money in the bank is safe, but there is a 50% probability that the car will be...

Setup from Question 1) An expected utility maximiser owns a car worth £60000 and has a bank account with £20000. The money in the bank is safe, but there is a 50% probability that the car will be stolen. The utility of wealth for the agent is u(y)=ln⁡(y) and they have no other assets.

Setup from question 2)Consider the setup from Question 1. A risk-neutral insurance company is willing to insure the car at the premium of π=£2/3 for every one pound of coverage.

Question 3:

Extracted text: Consider the setup from Questions l and 2. How much profits, in expectation, does the insurance company earn on insuring the individual? O a. £5 000 O b. £10000 O c. £20000 O d. £0