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An investors utility function is () = . He has an initial wealth of $140,000 and faces a potential loss of $100,000 with 1%. a)

An investors utility function is () = . He has an initial wealth of $140,000 and faces a potential loss of $100,000 with 1%. a) Calculate the maximum premium that he is willing to pay to insure against the loss. b) Suppose that an insurer has an initial wealth of $100 million and a utility function of () = . Calculate the minimum premium the insurer would require in order to offer the coverage

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