1. Hazel Nutt is trying to decide whether or not to purchase health insurance. She knows that if she is healthy, her wealth will be $320,000 this year. However, if she gets sick her wealth will only be $80,000. Hazel knows the probability of getting sick is 20%. Her utility function is written U(W) = sqrt(W/2) What is the most Hazel is willing to pay for full coverage insurance ?

2. A risk premium is the difference between what the risk-averse person is willing to pay and what a risk-neutral person is willing to pay. What is Hazel Nutt's risk premium?