4. Linda Balonniani owns a house worth $150,000. She cares only about his wealth (w), which consists of the value of the house. In any given year, there is a 20% chance that the house will burn down. If it does, its scrap value will be $20,000. Linda's utility function is u = 5 w1/2 . a. Is Linda risk-averse or risk-lover? Explain. Draw Linda's utility function. b. How much would Linda be willing to pay to insure her house against being destroyed by fire?

4. Linda Balonniani owns a house worth $150,000. She cares only about his wealth (w), which consists of the value of the house. In any given year, there is a 20% chance that the house will burn down. If it does, its scrap value will be $20,000. Linda's utility function is u = 5 w/ 1/2 a. Is Linda risk-averse or risk-lover? Explain. Draw Linda's utility function. b. How much would Linda be willing to pay to insure her house against being destroyed by fire