1. Suppose that there is a 30% chance Clyde is injured and earns $50,000, and a 70% chance he is healthy and will earn $500,000. Suppose further that his utility function is the following (utility = square root of income)

U=Income

a) Clyde's utility if he earns $50,000 is ____ and his utility if he earns $500,000 is:

i)50,000; 500,000

ii) 223.6; 707.1

iii) 100; 264.58

iiii) 707.1; 223.6

iiiii) 264.58; 100

b)Clyde's expected incomeis _____.

i) $275,000

ii) $365,000

iii) $500,000

iiii) $550,000

c) Clyde'sutility from hisexpected incomeis ____. Clyde'sexpected utilityof income is _____.

i) 223.6; 707.1

ii) 562.1; 604.2

iii) 604.2; 562.1

iiii) 707.1; 223.5

d)Clyde is risk ____. He will prefer ____.

i) averse; no insurance to actuarially unfair and full insurance

ii) lover; actuarially unfair and full insurance to no insurance

iii) averse; actuarially unfair and full insurance to no insurance

iiii) lover; no insurance to actuarially unfair and full insurance