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3. John's utility function for money is the 4th root of the amount of money, and he sets the utility of $100 million as 100, and the utility of $0 as O. John has a total net asset of $10 million including a house with a structure value of $2 million. 3a.(10 points) Compute John's utility for $10 million and use it to demonstrate whether John is risk-averse or preferring by comparing it with the utility for $10 million for a risk-neutral person who also has the utility for $100 million as 100 and the utility of $0 as O. 3b. (20 points) Past annual fire accident statistics indicate that there is a 1% probability that the structure of John's house may be totally destroyed by fire, a 2% probability that it may be 3/4 destroyed, a 3% chance that it may be 1/2 destroyed, a 4% chance that it may be 1/4 destroyed, and a 90% probability that nothing happens to the structure. John is deciding between either no fire insurance or full fire insurance of $2 million for the structure of his house. Compute IN DETAIL John's expected utility of no insurance. 3c. (10 points) For the $2 million full fire insurance for the structure of the house, compute IN DETAIL the maximum insurance premium John will be willing to pay. 3d. (5 points) Compute IN DETAIL the Risk Premium portion of John's maximum insurance premium. Edit View Insert Format Tools Table 12pt ~ Paragraph B I U A & TV CO V