Question: An agent faces a risky situation in which he can lose some amount of money with probabilities given in the following table: L055 1000 2000

An agent faces a risky situation in which he can lose some amount of money with probabilities given in the following table:

L055 1000 2000 3000 5000 6000 Probability 10% 20% 35% 20% 15% This agent has a utility function of wealth of the form U(Y) = In Y. His initial wealth level is 10000. a. b. Calculate the certainty equivalent of this prospect for this agent. Calculate the risk premium. If his initial wealth level is 100,000, calculate the certainty equivalent of this prospect for this agent. Calculate the risk premium. . What does the form of the utility function suggest about the changes in the certainty equivalent of this prospect as well as the risk premium once the initial wealth level is increased

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