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Corporate Finance · Quiz 2 · 23 Nov 2025 · September 2025 term

Question 20: Anjali can buy an insurance policy that pays her 1,200 u…

Question 20

+4 marksOne correct option

Anjali, an entrepreneur, has a utility function of the form
. If her new product is successful, she expects to earn 1,600 units. If it fails, she will earn 400 units. There is a 40% chance that her product will fail.
Based on the above data, answer the given subquestions.

Anjali can buy an insurance policy that pays her 1,200 units if the product fails. If she pays a price

for this policy, she would be sure to have an income of
regardless of success or

failure. What would be the largest price (
) that Anjali would be willing to pay for such an insurance?

  1. A

    256 units

  2. B

    360 units

  3. C

    484 units

  4. D

    576 units

Show answer

Correct answer

  • D

    576 units

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Question 20 of 25 in the IIT Madras BS Corporate Finance (Corporate Finance) Quiz 2 paper sat on 23 Nov 2025, in the September 2025 term (IIT M DEGREE AN EXAM QDB2 23 Nov 2025 NEW). It carries 4 marks.

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