Jack and Box are both starting with a unit initial wealth: W=1. They are looking to invest their entire wealth in an investment with two possible outcomes: a return of 55.2%, with probability 0.5, or a return of -55.2%. Jack evaluates the investment using a constant relative risk aversion utility function U(x)=sqrt(x). Box utility is given by U(x)=ln(x). ________________________________________________________________

(a) For Jack, compute his coefficient of relative risk aversion, evaluated at his initial wealth.

(b) For Box, compute his coefficient of relative risk aversion, evaluated at his initial wealth.

(c) What risk premium does Jack attach to the above return distribution? Compute the exact value, report two decimal places.

(d) What risk premium does Box attach to the above return distribution? Compute the exact value, report two decimal places.