Question 2 (7 points) Patrick and Romain have purchased a major sunglass producer in Portofino. Portofino is about to host a major international festival, and the owners estimate a huge increase in sunglass sales from visitors: total sales will be generating estimated 2.000.000 Euros cash. However, there is a 10 percent chance that the two-day event will be hit by rain and hence sales will be low, at 1.100.000 Euros. The owners' wealth was not enough for the acquisition of the company, and they had to acquire the company, worth of 5.000.000, by using their own 500.000 initial total wealth (and thus they had to borrow the rest). The investors will operate the business for just the current period, and it is also known that after the event the company will be sold back at 5.000.000. The owners' utility is given by U(W)=Was. Borrowing costs and discounting rate for the period are assumed to be 0 for simplicity, and the investors rank gambles using expected utility criterion. a) Up to how much is the investor willing to pay for a weather insurance policy that will compensate precisely the estimated difference between the high and low sales? b) Owners now contemplate about borrowing 1.000.000 (again, without any borrowing costs) and investing in shares of an umbrella producer that will see its sales grow, and share prices jump by 90 percent in case of rain, and drop by 10 percent in case of sun. After the event, they can sell and return the borrowed funds