2. This question includes a personal parameter value determined by a formula including information from your student ID number. Set A equal to the value of the sum of the last three digits of your student ID number.-Sc, for example, ifycur student ID number is 0961542 then: A = 5 + 4 + 2 = l 1. Use the following formula to determine the probability of the good state (i.e., see below ~ the good state is when shares triple in value). .__A+1c 7\" "100 If A = 11, for example, the value becomes: ' A + 10 11 + 10 21 100 100 :100 20.21 An individualwith an initial Wealth of We can purchase Shares. Shares either triple in value [this happens with probability 1E computed by your formula] or are a complete 1035 and thus haVe value zero The utility function of the individual IS u(W)=W1/2 (i. e ,uCW): 1/ W) Let S be the amount of money spent on shares. ' Hint: In the \"good\" state of the world wealth is W0 + 2S and in the \"bad\" state of the world wealth is W0 S. 1) Draw the (probability tree) graph describing the lottery representing this investment problem. ii) Find this person's Optimal demand for shares as a function of W0. How does the person s demand for shares vary as W0 varies? Provide economic intuition and include a (state contingent wealth) graph demonstrating the result. (Hint: Include in your answer how the type of risk preference of the individual impacts the precise relationship between S and W0. This relates to the material in Topic 5.)