Question: Question 14 (3 points) Mike has a utility function expressed by U(W)= W0.5, where W stands for wealth (assuming wealth is positive, i.e. W>0), and

Question 14 (3 points) Mike has a utility function expressed by

Question 14 (3 points) Mike has a utility function expressed by U(W)= W0.5, where W stands for wealth (assuming wealth is positive, i.e. W>0), and U(W) is the utility given a certain level of W. Mike has initial wealth of $10,000. Mike feels that he faces the following probability distributions of losses with respect to his wealth: Loss Amount ($) Probability $0 70% $1,000 20% $8,000 10% If Mike's utility function is changed to U(W)=W0.2, the maximum premium he is willing to pay will be . If the function is changed to U(W)=5W, the maximum premium he is willing to pay will be Higher: lower Higher; the same Lower: higher Lower: the same

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