A builder is considering buying insurance in order to cover penalties for failing to meet completion dates of a house that she has under contract. The contracted penalties are $10,000 per house for not meeting the completion date. The utility function for money, x, between -$10 and +$10 (in thousands) for the builder isU(x) = (x+10)/(x+11).

1. a)(10) What is the expected dollar cost to her of the gamble she takes by not insuring, as a function of p (the probability of meeting the schedule)?
2. b)(15) If p = 0.8, what is the total insurance payment she should be willing to make to avoid the gamble?
3. c)(10) If p = 0.8, what is the risk premium?
4. d)(10) For what value of p should she be willing to pay an insurance cost of $5000?
5. e)(10) What is the builder's risk aversion function?