Explain how CAT bonds work. CAT bonds pay the issuer of the bond when a predetermined loss occurs. If there is no covered loss, there will be higher returns for investors. However, if a predetermined loss occurs, the investors lose the principle amount. Assume the risk-free rate is 1.25%. The risk premiums of a CAT bond are given by the Cobb-Douglas function: RP = A Probability(Severity) Assuming Probability = 0.01 and Severity = 0.67, construct three Tables By varying A from 0.15 to 0.95 in steps of 0.1 By varying from 0.15 to 0.95 in steps of 0.1 By varying from 0.15 to 0.95 in steps of 0.1 Comment on what trends you observe.