1. Guy Lalibert, the original owner of Cirque du Soliel, is concerned about the health of his star trapeze artist. If the artist is able to perform a triple somersault, Guy's revenues will be W,. However, if his star crashes and is unable to perform. revenues will fall to W,;. Guy has determined that the probability of a crash is p. Guy''s Bernoulli utility of money function is (W) = fnW. He has determined that the probability of an accident is p = .10 (10%), and that W, = 100 and Wo = 5000. (a) What is the expected value of Guy's revenues? (b) Is Guy risk loving, risk neutral or risk averse? Why? What is his coethcient of absolute risk aversion? Of relative risk aversion\" How do they change with W7 () Determine Guy's expected utility. How much would he be willing to accept with certainty and be equally well off?7 What is this amount called? (d) Lloyds of London is willing to offer Guy insurance at a cost of q = 0.10 per dollar of coverage purchased. Determine how much insurance Guy will purchase in this case. Is he fully insured? How much better off is he relative to the case with no insurance that you calculated in part )? (e) Say the price of insurance increases to g = 0.15 per dollar. How much insurance does Guy purchase now? Is he fully insured? Compare his level of utility to the no insurance case in part c| and the case in part d)