Question: Derive the CRRA (Constant Relative Risk Aversion) utility function. Start fromrra(x)=-u''(x)u'(x)x=,( where is a constant )and find the function u(x) which satisfies the above condition.6.

Derive the CRRA (Constant Relative Risk Aversion) utility function. Start fromrra(x)=-u''(x)u'(x)x=,( where is a constant )and find the function u(x) which satisfies the above condition.6. Suppose you are risk-averse and you are considering investing in two assets A and B. Both assets have the same expected return and variance and that their returns are uncorrelated. That is,E(rA)=E(rB)=,A2=B2=2, and AB=0.(a) You have two options: (i) put your money in one or the other (either A or B), and (ii) hold both assets. Which one would you prefer in terms of the expected return? Show mathematically.(b) Which option would you prefer? Calculate the optimal weights for asset A and B and answer.7. In class we define the risk premium as follows:u[E(x)-p]=E[u(x)]For a small size of risk, we would like to express the risk premium p as a function of risk aversion coefficient.(a) Denote E(x) as

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