1. [4,75 p.) Alex has a utility function u(w)= vw and all his wealth is invested in the investment project that will bring $25 if the project is successful and $9 otherwise. Assume that the probability of success is 0.5. Dina is a risk neutral agent and she is willing to buy Alex's project (before the uncertainty is resolved) for $X. (a) (1 p.) Find all values of that are mutually beneficial for Alex and Dina. Provide graphical solution using contingent commodities diagram. Use different colours for Dina and Alex. Comments to the graphical solution must be provided. (b) (0,75 p.) Suppose that X=17. Consulting firm ABC can evaluate the considered investment project and say for sure whether the project is going to be successful or not. Find algebraically the maximum sum that Alex is willing to pay for this information. (c) (0,5 p.) Suppose that Susan faces exactly the same problem as Alex but she is risk neutral. Find the maximum sum that Susan is willing to pay for the information offered by the consulting firm ABC. (d) (1,25 p.) Provide graphical solution for (c) and (b) using contingent commodities diagram (Do not use the diagram from (a), produce a new one). Use different colours for Susan and Alex. Comments to the graphical solution must be provided (e) (1,25 p.) Compare the maximum sums found in (b) and (c). Would the result of this comparison be different if Alex had different preferences but the same type of risk attitude? 1. [4,75 p.) Alex has a utility function u(w)= vw and all his wealth is invested in the investment project that will bring $25 if the project is successful and $9 otherwise. Assume that the probability of success is 0.5. Dina is a risk neutral agent and she is willing to buy Alex's project (before the uncertainty is resolved) for $X. (a) (1 p.) Find all values of that are mutually beneficial for Alex and Dina. Provide graphical solution using contingent commodities diagram. Use different colours for Dina and Alex. Comments to the graphical solution must be provided. (b) (0,75 p.) Suppose that X=17. Consulting firm ABC can evaluate the considered investment project and say for sure whether the project is going to be successful or not. Find algebraically the maximum sum that Alex is willing to pay for this information. (c) (0,5 p.) Suppose that Susan faces exactly the same problem as Alex but she is risk neutral. Find the maximum sum that Susan is willing to pay for the information offered by the consulting firm ABC. (d) (1,25 p.) Provide graphical solution for (c) and (b) using contingent commodities diagram (Do not use the diagram from (a), produce a new one). Use different colours for Susan and Alex. Comments to the graphical solution must be provided (e) (1,25 p.) Compare the maximum sums found in (b) and (c). Would the result of this comparison be different if Alex had different preferences but the same type of risk attitude