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Please write your answers to all questions neatly and do not try to fit all answers onto this sheet of paper. Explaining your reasoning on all answers can help you earn partial credit, so err on the side of including a clear and concise explanation of your logic. "Round all decimal numbers to their nearest hundredth value. 1) Bob's income is $122,500. There is a 40% chance Bob will get sick during the next year. If Bob gets sick, he will incur a loss of $32,500 (this is Bob's cost of illness). His utility function is U(1)-105 (that is, utility equals the square root of Income). a) What is Bob's expected income? (5 points) b) What is Bob's expected loss? (5 points) c) What is Bob's expected utility? (5 points) Please write your answers to all questions neatly and do not try to fit all answers onto this sheet of paper. Explaining your reasoning on all answers can help you earn partial credit, so err on the side of including a clear and concise explanation of your logic. "Round all decimal numbers to their nearest hundredth value. 1) Bob's income is $122,500. There is a 40% chance Bob will get sick during the next year. If Bob gets sick, he will incur a loss of $32,500 (this is Bob's cost of illness). His utility function is U(1)-105 (that is, utility equals the square root of Income). a) What is Bob's expected income? (5 points) b) What is Bob's expected loss? (5 points) c) What is Bob's expected utility? (5 points)
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