1. Suppose Tony Hawk (a professional skateboarder) has a utility function u(x) = x2/10 over his monetary income x. He earns $200,000 from professional tournaments and commercial sponsorships. But he faces a 20% chance of suffering a serious injury that will reduce his annual income to $80,000. What is the expected utility of the gamble that Tony confronts? What is the expected value of wealth from this gamble? What can you say about his attitude towards risk? Draw Tonys utility function and show his attitude towards risk.

Suppose Tony Hawk (a professional skateboarder) has a utility function u(x)=x2/10 over his monetary income x. He earns $200,000 from professional tournaments and commercial sponsorships. But he faces a 20% chance of suffering a serious injury that will reduce his annual income to $80,000. What is the expected utility of the gamble that Tony confronts? What is the expected value of wealth from this gamble? What can you say about his attitude towards risk? Draw Tony's utility function and show his attitude towards risk