All work with methodology and equations used must be shown in detail. The actual equations and careful explanations are required to receive credit for answers, even if correct. Correct answers without proper work shown in enough detail will be marked wrong. Incorrect answers with proper work and the method outlined will be graded positively with partial credit. Good Luck!

Jack has a utility of wealth function U(w)=square root of (W).

1. Is the following true? Jack prefers more wealth to less, and at a diminishing rate (in wealth). How do you know? Find Jacks risk aversion measure.

2. Jack is offered a fair game. Will he take it? Rely on and justify using the Expected Utility Rule

3. In a mean-standard deviation plane, draw the efficient frontier assuming there is a risk- free asset in the economy. Show what Jacks indifference curves would likely look like in this graph. How would Jack find his optimal portfolio? Dont worry, this is only indicative. I am looking for the correct shapes and directions. No numbers or scale----just a general hand-wavy graph will suffice