Question: can you please help explain David is an expected utility maximiser with von Neumann-Morgenstern utility function v(w) = w. He has total wealth of $100,

can you please help explain

David is an expected utility maximiser with von Neumann-Morgenstern utility function v(w) = w. He has total wealth of $100, including a car valued at $75. There is probability = 1/5 of here car being stolen. An insurance company offers to fully insure David against car theft in exchange for a premium (i.e., price) of $p. That is, in exchange for $p, the insurance company contracts to pay David $75 if his car is stolen.

(a) Is David risk averse, risk neutral or risk seeking? Please give a simple explanation.?

(b) What is the actuarially fair value for p?

(d) Illustrate your answers to (a) and (b) in a Hirshleifer-Yarri diagram

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