Answer all parts of this question. (a) Suppose that a consumer has a utility function that satisfies CRRA U(Y)=1Y1with>0,=1=ln(Y)with=1 Suppose initial consumption or income of the consumer is $200,000. Suppose that the payoffs from an investment in normal economic times are a 50% chance of $2,000 or a 50% chance of $2,000. Derive expressions for the risk premium using the exact expression and the approximation. Compute the risk premium using the exact expression and the approximation for values equal to 0,0.5,1,2,5 and 10 . What happens to the difference between these two estimates of the risk premium as increases? Comment on your results. (b) Assume that CAPM is true. The risk-free rate is 8%, the expected return on the market portfolio is 16% and the standard deviation of the return on the market portfolio is 20%. Consider a portfolio P with expected return of 12% and assume that it is on the efficient frontier. (i) What is the beta of portfolio P ? (ii) What is the standard deviation of the return on portfolio P ? (iii) What is the covariance and correlation between the return on portfolio P with the return on the market portfolio