Question: 1. 2.8 Marys utility function is U(W) = W0.33, where W is wealth. Is she risk averse? Mary has an initial wealth of $27,000. How

1. 2.8 Mary’s utility function is U(W) = W0.33, where W is wealth. Is she risk averse? Mary has an initial wealth of $27,000. How much of a risk premium would she require to participate in a gamble that has a 50%

probability of raising her wealth to $29,791 and a 50% probability of lowering her wealth to $24,389?

(Hint: See Solved Problem 16.3 and the discussion of the risk premium in Figure 16.2.) M

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