Consider an investor whose function of utility over non-negative levels of wealth can be represented as

This investor now decides to put a part of his initial wealth into a risky asset. There are n senarios of possible outcomes, in which the risky asset can have positive or negative rate of return with probability .

If is the amount of wealth to be invested in the risky asset, calculate this investors Certainty Equivalent CE and Risk Premium P.

In(w) u(w) In(w) u(w)