8.4 Suppose there is a 50-50 chance that a risk-averse individual with a current wealth of $20,000 will contact a debilitating disease and suffer a loss of $10,000.

a. Calculate the cost of actuarially fair insurance in this situation and use a utility-of-wealth graph (such as shown in Figure 8.1) to show that the individual will prefer fair insurance against this loss to accepting the gamble uninsured.