1. Suppose an individual has the following Bernoulli utility u(x) = 1-e-ax with a > 0. (a) Classify this utility in terms of its absolute risk aversion. (IRAR, CARA, DARA) (b) Classify this utility in terms of its relative risk aversion. (IRRA, CRRA, DRRA) (c) Now consider this utility in a contingent claims context and fix a = 5. Let there be two states of the world with fixed probabilities p = 2/3 and p2 = 1/3. Determine the iso-expected value line (fair odds line) associated with A = {x = 3, x2 = 3}. Graph this line along with a sketch of the indifference curve EU (x) = EU(A). (d) At A, who is more risk averse - our individual with u(x) = 1 e5 or an individual with u(x) = (e) Does your conclusion hold at any point along the certainty line? Explain why