$($a$)[15\%]$ Define carefully and precisely what is meant by

risk aversion.

$($b$)[15\%]$ Will an individual with a utility of wealth

function $U=100-\frac{60}{W}$ show risk averse behaviour or

not?

$($c$)[30\%]$ Consider the prospect $[6,2$; $(1/2),(1/2)].$

Calculate the expected value and the expected utility

of this prospect, and illustrate your answer on a

carefully drawn diagram.

$($d$)[15\%]$ Define the term "risk premium", and explain in

simple language what it measures.

$($e$)[25\%]$ On your diagram indicate how you find the risk

premium graphically, and calculate its value for the

prospect qiven in $($c$).$